The U.S. Department of Labor recently issued a proposal to allow more salaried workers to earn overtime pay, but legal challenges could be ahead.
Salaried employees and overtime
Contrary to popular belief, salaried employees are not always exempt from being paid overtime. In most professions, in order to be exempt from overtime, an employee must not only be paid on a salary basis, but that salary must be above a certain threshold, currently $455 per week ($23,660 per year). If the employee’s salary exceeds that amount, the employee is still entitled to overtime unless the employee’s job duties fall under one more exemptions to the overtime rules.
A few years ago, the Obama Administration attempted to raise the number of salaried workers eligible for overtime by increasing the minimum salary threshold to $47,000 per year. Prior to Obama, the overtime rule had not been updated since 2004. Under the Obama Administration’s proposal, nearly all employees earning less than $47,000 per year who work more than 40 hours in a week would be automatically entitled to overtime pay. However, the Obama Administration’s rule was blocked in the courts and stalled before it was ever implemented.
Now, the Trump Administration has proposed its own rule. Under the new proposal, most workers who earn less than $35,000 would automatically become eligible for overtime pay if they work more than 40 hours in a week. More court challenges are expected for the Trump Administration rule, as well, with some saying the new proposed threshold is still too high and others saying it’s not high enough.
Trump’s proposal calls for using public comments and reviews of the economic climate every four years to make adjustments. Under the previous administration’s regulations, overtime increases would be based on cost of living increases.
Legal challenges ahead
An anticipated one million workers would potentially become eligible for improved wages under the Trump Administration’s proposal. The Department of Labor seeks public commentary of the proposed overtime regulations before finalizing them. Rules published before the 2020 election would be difficult to remove if a different president is elected. Business organizations are already raising concerns about rising payroll costs and may challenge this rule in court. On the other side, worker groups are raising the alarm that the new regulations fall short of the previous proposal. They want further expansions of overtime pay and are fighting the 2017 move by a judge to block the planned Obama overtime rules. The case continues to weave its way through the appeals process, which could impact as many as four million workers when it is ultimately decided.
Companies across business sectors have been monitoring the overtime rules and lawsuit closely. CBS reportedly settled an overtime action by paying out almost $10 million, and other major corporations such as T-Mobile, Chipotle, and Bank of America are embroiled in similar litigation.
Regardless of the outcome, it is important to remember that many salaried workers are already entitled to overtime pay. Workers who are not paid what they are owed under the law can recover past wages by filing a civil lawsuit.