by Herman N. (Rusty) Johnson, Jr., Associate Professor of Law, Samford University Cumberland School of Law
May 18, 2016, is a momentous day for U.S. workers. The U.S. Department of Labor released new overtime rules that restore the New Deal-era promise of the Fair Labor Standards Act (FLSA) by increasing the salary level required to exempt certain employees from overtime pay. The new rules will be a boon for working and middle class Americans, as it will increase their pay, provide them more time to spend with their families, lead to improvements in health and productivity, and create jobs.
The FLSA, originally enacted in 1938, assures overtime premium pay of time-and-a-half for employees who work more than 40 hours per week. However, the FLSA exempts some types of employees from the overtime protection, in particular white collar workers classified as executive, administrative, professional, outside sales, and computer employees. Congress delegated authority to the Secretary of Labor to define the exemptions, and generally, employers must satisfy three requirements to properly classify employees as exempt pursuant to a white collar category: 1) the employees must be paid a fixed salary, 2) the employees must be paid at least a specific salary amount, and 3) the employees’ primary duties must involve one of the enumerated exemptions.
Currently, the DOL’s regulations set the salary level at $455 per week, which is $23,660 on an annual basis. The rigors of inflation and inattention have eroded the FLSA’s overtime protection at this level. The designated amount is less than the poverty line for a family of four and only 1.6 times the federal minimum wage of $7.25. Furthermore, at present, a mere seven percent of salaried workers receive overtime protection, whereas 62 percent did so in 1975.
The new DOL regulations increase the salary level required to trigger the white collar exemptions. The revised rule, which takes effect December 1 of this year, sets the salary level at $913 per week, or $47,476 annually, which equates to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census region (currently the South). The new rule also creates an updating mechanism which benchmarks the salary level every three years to the same metric.