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5 Million Workers Likely To Soon Have Right to Receive Overtime Pay

The U.S. Labor Department has proposed new rules that include increasing the minimum salary threshold level for executive, administrative and professional exemptions and the minimum total annual compensation level for the “highly compensated employee” exemption under the Fair Labor Standards Act.  The new proposal would raise the minimum salary thresholds to $970 a week (i.e. $50,440 a year) from the current $455 per work ($23,660 a year).  The passing of this new rule, which is expected, would amount to a huge victory for employees across the country.

The present $455 salary threshold has not been updated since 2004 and has left certain low salaried managerial or office work workers in an unfair situation of being exempt from receiving overtime pay.  In announcing the proposed overtime rules change, the US Department of Labor specifically identified jobs such as convenience store managers and fast food assistant managers as being required to work 50-60 (or more) hours a week and be compensated as little as $23,660 a year, which is less than the poverty level for a family of four.  These employees can be paid a minimum salary of $23,660, and not be paid any additional compensation for overtime hours worked. It has been estimated the change in law will help 5 million workers become overtime eligible and will increase employees’ wages across the country by $1.3 billion.  The US Department of Labor has submitted the change to the Office Management and Budget (OMB), The OMB has 30 to 90 days to review and then publish the rules in the federal register as final.

In addition to increasing the salary threshold, the US Department of Labor has also proposed to increase the total annual compensation requirement needed to exempt highly compensated employees to $122,148 annually and to establish a mechanism to automatically update the future salary and compensation levels.

Retail and restaurant businesses are two industries who will be hardest hit by the increase in the minimum salary threshold level for managerial employees.  McDonalds, who has recently been subjected to worker protests, is one company who will likely be required to change its pay or work schedule for managers and assistant managers.  To McDonald’s credit, they announced last month that they will increase hourly rates for its U.S. restaurant employees to $1 above the mandated minimum wage on July 1 and expects average wages to rise to more than $10 an hour by the end of 2016.  In the new rule are put into place as expected, McDonalds will also have to increase the salaries of managerial employees who make less than $50,440, or start paying them for overtime hours worked.

Our New Jersey Employment Lawyers will continue to follow the new proposed rule changes to the Fair Labor Standards Act.  If you have any questions about your wage and overtime rights, please feel free to contact our office to speak to one of our attorneys about your potential matter.