Major New Overtime Regulations Issued by Department of Labor

Sara Geenen

On May 18, 2016, the U.S. Department of Labor issued its Final Rule, which will extend overtime protection to millions of middle-class workers. The Fair Labor Standards Act establishes minimum wage and overtime protections for workers. Employees in the U.S. are either “exempt” or “non-exempt” from federal wage protections that require employers to pay their employees overtime – time and a half – for all hours worked in excess of 40 per week. While there are several different exemptions, one exemption applied to full time salaried administrative and professional employees who earned just $23,660 per year (or more). As the result of inflation, this low threshold often means that low-level retail supervisors and entry-level office workers are deemed “exempt” from the overtime law requirements by their employers, who in turn, required the individuals to work more than 40 hours per week without additional compensation. The overtime protections initially applied to 35% of all workers; the percentage of covered workers has now fallen to 7%.

The new rules aim to reinstate the intended protections of the overtime law to middle-class workers. Specifically, the rules increase the threshold for such an employee to be “exempt” from overtime protections by requiring that the employee earn at least $47,476 per year, a figure which will be indexed to inflation and adjusted every three years. The Department of Labor estimates that 4.1 million workers will gain overtime protections when the new rule goes into effect on December 1, 2016.