U.S. Department of Labor Proposes Changes in Overtime Regulations

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The United States Department of Labor has published proposed regulations that would change many of the current regulations governing the payment of overtime. One proposed change would raise the salary threshold below which workers would automatically qualify for overtime. Currently, employees who earn $155 a week or more can qualify as a "white collar" employee and are excluded from receiving overtime pay. The proposed Department of Labor regulation would raise this minimum salary to $425 a week or $22,100 a year such that any worker earning less than $22,100 a year automatically would be entitled to overtime pay. This $270 increase in minimum salary is said to be the largest since the Fair Labor Standards Act was passed in 1938. The Department has stated, "The impact of this revision will be to increase the wages of 1.3 million lower-income workers and reduce the number of low-wage salaried workers currently being denied overtime pay." The Department is also seeking to revise some of the job descriptions that appear in the old Fair Labor Standards Act regulations in order to account for many of the changes in the workplace over the past 50 years.

The "short test" for overtime determination relying on an employee's primary duty as the determining factor of an employee’s exempt status will be retained under the proposed rule. The current short test salary applies to employees who earn $250 a week or more. The proposal eliminates the 'long test' rule "restricting exempt employees from devoting more than 20% of time in a workweek performing nonexempt duties." Several other changes have been proposed with respect to the duties of executive, administrative, professional, computer or outside sales employees and the requirements for exemption from the Fair Labor Standards Act.

The proposed rule retains the "salary basis" rule, which prohibits deductions from exempt salary for partial-day absences. Additionally, the proposal would change the current rule, which provides that only hourly workers' wages are subject to deductions for full day absences taken for disciplinary reasons. Under the new rule, The Department would allow deductions from the salary of exempt employees for such absences.

The Department's actions are an effort to eliminate much of the confusion and antiquated language that many have associated with the current regulations in light of the constantly changing workforce. While direct payroll costs for making these changes are a possible result, officials are hoping that these new regulations will make it easier for employers and employees to understand their obligations with respect to overtime payments.

The Department of Labor invites comment on the Notice of Proposed Rulemaking, which has been published in the Federal Register. See Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees; Proposed Rule, 68 Fed. Reg. 15559 (proposed March 31, 2003).

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