The U.S. Department of Labor recently published new overtime regulations that become effective in December 2016. (View the new regulations here: https://www.dol.gov/whd/overtime/final2016.) Although there have not been any revisions to the Fair Labor Standards Act overtime regulations since 2004, anti-fair-pay proponents are claiming that the “sky is falling” and that “small business” won’t be able to compete – which is nonsense.
Historical Perspective
In 1989, CEOs made 58.7 times more then their employees, pulling in the average employee annual income by January 7. In 1995, it was 71.6 times more, meaning that by about midnight on Jan. 4, a CEO had earned an average employee's annual salary. In 2014 (the more recent data), CEOs earned 303 times as much as the average, non-management employee … so before the sun rose on Jan. 2, he or she had earned an employee's salary.
Wages in the United States, after taking inflation into account, have been stagnating for more than three decades. Typical American workers and the nation’s lowest-wage workers have seen little or no growth in their real weekly wages. (See more at http://inequality.org/income-inequality/#sthash.EktbqhZg.dpuf.)
Between 1979 and 2007, paycheck income of the top 1 percent of U.S. earners exploded by over 256 percent. Meanwhile, the bottom 90 percent of earners have seen little change in their average income, with just a 16.7 percent increase from 1979 to 2014. (See more at http://inequality.org/income-inequality/#sthash.a175434l.dpuf.)
Overtime Rules Were Outdated
Hourly workers in most service and blue-collar occupations are guaranteed the right to overtime pay, while salaried workers’ eligibility is determined by their pay and the nature of their duties.
Prior to the new overtime regulations, the overtime salary threshold was $455 per week ($23,660 per year), which was less than the poverty threshold for a family of four. This meant that many white-collar workers with very low salaries (sometimes just above the overtime threshold) were classified by their employers as professionals, administrators, or executives – and thus exempted from overtime pay.
So an assistant manager at a fast-food restaurant with a salary of $24,000 and who spent 95 percent of his or her time cooking fries, running a cash register and sweeping floors can be required to work 60 or 70 hours a week and be denied overtime pay simply because he or she was classified as a manager. Similarly, a recent college graduate with a salary of just $35,000 who was regularly required to work 70 hours per week as a junior accountant with no prospect of additional pay, simply because his or her employer deemed him or her a “professional” who was exempt from overtime regulations.
New Overtime Regulations – Steps In The Right Direction
The new regulations:
The final rule will become effective on December 1, 2016, giving employers more than six months to prepare. The final rule does not make any changes to the duties test for executive, administrative and professional employees.
White-collar employees can be exempt from overtime only if their jobs meet all three tests for executive, administrative or professional employees. In addition to receiving a salary at or above the new thresholds, each exempted employee must also exercise the job duties of those categories and be paid on a salaried basis.
Lebau & Neuworth will continue to blog updates on this important development.
