Employers with salaried employees beware: the federal Department of Labor is set to issue new regulations that will require Massachusetts employers to pay overtime to the 110,000 currently salaried workers making less than $50,440 per year. And while the regulations were originally scheduled to take effect in July 2016, some sources think the new rule could go into effect this spring.
The New Regulations Will Increase The Overtime Exemptions’ Earning Test
As employers know, the overtime pay laws—requiring time-and-a-half for time exceeding a 40-hour workweek—can mean a big hit to the bottom line, especially because certain jobs just can’t be done in less than 40 hours per week. Fortunately, the laws “exempt” certain white-collar administrative, professional, executive, and other employees from overtime pay requirements if their job descriptions meet certain tests.
One critical test is what the employee earns. Since 2004, employees could only be exempt from overtime pay if they earned a salary of at least $455 per week (that is, $23,660 per year). Given this modest threshold, this test has almost never been an impediment to categorizing an employee as salaried and not eligible for overtime.
But not for long—the Department of Labor is in the final stages of more than doubling the earning requirements for overtime exemptions. The proposed regulations will increase the weekly salary requirement so that employees must reach the 40th percentile of weekly earnings for full-time salaried workers to become exempt. The Department of Labor is projecting this to mean that, in 2016, an employee that earns less than $970 per week (that is, $50,440 per year) must be paid overtime. And as the cost of living increases each year, the earnings requirement will automatically increase.
The Increased Salary Requirement Could Take Effect As Early As This Spring
Employers were already on a deadline to adjust to the new regulations—the Department of Labor officially projected that the regulations would issue in July 2016. But some commentators are saying that the change could come as early as this spring.
Reportedly, Labor Secretary Thomas Perez has told media sources he is “confident” the final rule would be issued by spring 2016. The Department of Labor is considering the early release apparently to minimize the risk of a challenge by Republican legislators, a risk that grows as the Presidential election nears.