President Obama’s New Overtime Law

DSC_0090There has been a steady increase in the number of employees who work over a normal 40-hour workweek. A workweek, defined, is a period of 7 consecutive days, starting on any day the employer decides (e.g., Sunday to Saturday). The typical workweek for a full-time employee consists of 40 hours. For any hour that is worked past the 40-hour workweek, an employee should receive what is known as “overtime” under the Fair Labor and Standards Act.  The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Overtime is usually equivalent to at least 1.5 times the employee’s hourly wage. For example, suppose you work 45 hours in one workweek with a straight pay of $10/hr. In this case, you should be paid $10/hr for the first 40 hours (totaling $400) and $15/hr for the 5 overtime hours (totaling $75)

Prior to July 6, 2015, certain executive, administrative, and professional workers (“white-collar workers” or “EAP workers”) were “exempt” from overtime.  To be considered exempt (and therefore not eligible for overtime), an employee had to: (a) be paid at least $23,600 per year ($455 per week), (b) be paid on a salary basis and (c) perform exempt job duties. These requirements are outlined in the FLSA. Therefore, under the old laws, if an employee made less than $23,600 per year or less than $455 per week, he or she was automatically eligible for overtime.

On July 6, 2015, in response to an executive order signed by President Barack Obama in March 2014, the Department of Labor (“Department”) published a Notice of Proposed Rulemaking that changes the meaning of overtime in the United States. President Obama’s order seeks to raise the threshold for overtime eligibility. The new overtime law would make it so salaried employees earning less than $50,440 a year or less than $970 a week are automatically guaranteed time and a half after logging a 40-hour work week. The new overtime law doubles the threshold requirement to be eligible for overtime.

Prior to July 6, 2015, if an employee made less $23,600 per year or less than $455 per week, they were automatically eligible for overtime. Now, an employee earning less than $50,440 a year or less than $970 a week is automatically eligible for overtime.   This change could impact over 5 million Americans and over 200,000 workers in Pennsylvania alone. President Obama’s order expected to take place as early as 2016 could expand the number of overtime-eligible employees from 8% to 40%.

The Department of Labor (“Department”) supports President Obama by stating that overtime laws haven’t evolved to keep up with spikes in cost of living. The current $23,660 threshold is considered poverty level for a family of four. This new order could improve the lives of hundreds of thousands of Pennsylvania citizens. By way of this rulemaking, the Department seeks to update the salary level to ensure that the FLSA’s intended overtime protections are fully implemented, and to simplify the identification of nonexempt employees, thus making the EAP exemption easier for employers and workers to understand.

President Obama’s new order set to take place in 2016 may affect your overtime eligibility in Pennsylvania.

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