DOL Announces Overtime Pay Proposal

On March 7, the Department of Labor announced a proposal which would make more American workers eligible for overtime pay. 

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By introducing the first salary threshold increase since 2004, this proposal would mean that workers making less than $35,308 would be eligible for overtime at time-and-a-half for hours worked over 40 hours in a week. The current threshold is $23,600 annually or $455 a week. Estimates say that this is likely to affect approximately one million workers who will become eligible for overtime under the new proposed ruling.

However, the new proposal does not mention any changes at all to the duties test, which has always been a rather gray area when employers try to determine exactly which employees are exempt “white collar” workers.  Just because an employee is paid a salary, they are not necessarily exempt from overtime  --  they must also perform duties that fall within the exempt classifications, or else they qualify for overtime pay.
 
Besides the wage limit, there are three “white-collar” exemptions that employers may look to in determining whether an employee fits the “exempt” criteria, and each one has its own unique standards:
 

Executive Exemption

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
     

Administrative Exemption

  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
     

Learned Professional Exemption

  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instructio
     

Employers should take care when creating Job Descriptions. If a job should be exempt from overtime pay, do not include any duties in the Job Description that would make the worker fall outside the DOL’s exemption definition. Then be diligent in following up, making sure that employees are following the duties outlined in their Job Descriptions and not doing tasks that could jeopardize their overtime exemption. DOL audits can include interviews with employees to confirm that they are classified correctly as far as overtime pay is concerned, so it’s very important for employers to be proactive when making these judgements.

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