Posted on July 7, 2015

ICYMI: U.S. Department of Labor Proposes Higher Overtime Threshold

A much anticipated Labor Department rule on overtime exemptions was proposed on June 30.

The new rule has the potential to increase the standard salary threshold for overtime exemptions to $50,440 per year or $970 per week. Salary and compensation levels would automatically be updated.

Under the rules proposed June 30 by the Labor Department, workers earning a salary of $970 per week would be eligible to claim overtime in 2016. That salary threshold is only $455 per week in 2015. The June 30 proposal would also almost double the overtime threshold that hasn’t been touched since 2004: it would equal $50,440 in 2016, up from $23,660 in 2015.

These changes mean that the total annual compensation required to exempt certain higher compensated employees would increase to $122,148 annually from $100,000. The methods for automatically updating the salary and compensation levels each year would be established under the Notice of Proposed Rulemaking (RIN 1235-AA11).

In order to be exempt from overtime, employees must meet a certain criteria related to their primary job duties and be paid a salary no less than a specified minimum amount, according to the Labor Department. Labor officials are also considering whether “revisions to the duties tests are necessary in order to ensure that these tests fully reflect the purpose of the exemption.”

The Labor Department says this newly proposed rule would offer overtime protections to nearly 5 million workers within the first year.

The Office of Management and Budget has reviewed the proposal of the new rule, but it has yet to be published in the Federal Register. On July 6, a comment period for the rule began. Comments may be submitted online or mailed before September 4, 2015.

Want to learn more about these overtime changes and how it could affect you? A fact sheet and a list of frequently asked questions on the proposed rule are available at the Department of Labor’s Web site.

Already wondering how you are going to track more employee hours? See how Paycor's Time and Attendance tracking can help.

Source: Bloomberg BNA