Pres. Obama ordered the DOL to update FLSA provisions about overtime pay.
On March 13, 2014, Pres. Obama signed a Presidential Memorandum ordering the U.S. Secretary of Labor Tom Perez and the Department of Labor to update and streamline the provisions of the Fair Labor Standards Act pertaining to overtime wages.
The Memorandum noted that the FLSA protects many workers by guaranteeing that they earn 1.5 times their normal hourly wage for each hour they work over 40 hours in a week. Several categories of employees are exempt from overtime wage protections, including salaried “executive, administrative and professional,” or “white-collar” employees. Only salaried employees who earn less than $455 per week may claim overtime pay.
The Memorandum stated that the exemptions have not kept up with the way that the U.S. economy has evolved and, therefore, no longer protect the workers the way they used to. The exemptions were initially intended to protect employers from having to pay overtime pay to employees who were already very well-compensated for their work. In the current economy, it is becoming more common for low-level managers earning low salaries to work so many hours in a week that they do not even earn minimum wage for each hour they work.
The Memorandum ordered the DOL to examine the overtime pay provisions of the FLSA and alter them so that they address the realities of the U.S. economy. Additionally, Pres. Obama urged the DOL to make the rules simpler so that business owners and employees can understand them more easily.
Two critical changes
Sec. Perez later clarified in remarks before the International Association of Fire Fighters legislative conference on March 17, 2014 that the DOL was looking at making two key changes to the FLSA overtime regulations. First, the DOL is looking to raise the salary threshold for claiming overtime wages. A White House overtime pay fact sheet noted that the threshold has not kept up with inflation. Only 12 percent of salaried workers earn less than the threshold in presently, compared to 65 percent of employees in 1975.
Second, the DOL wants to close a “loophole” in the “primary duty” test that employers use to classify whether employees are managers. Currently, even if a person only spends 1 percent of his or her time on executive or managerial duties and the rest of the time on non-managerial duties, an employer can still call the employee a manager and deny overtime wages.
Speak with an attorney
The FLSA continues to change as years pass, and both employers and employees need guidance on what protections the law affords. If you have questions about the FLSA or other matters pertaining to business transactions or litigation, speak with a seasoned business attorney who can offer you guidance based on your specific circumstances.
Keywords: overtime; FLSA; wages