May 23, 2016

U.S. Labor Department Significantly Expands Number Of Workers Eligible For Overtime

Last week, the U.S. Department of Labor (DOL) finalized a regulation that will significantly expand the number of salaried workers eligible for overtime compensation under federal law. 

First, the rule increases by more than 100 percent the income threshold under which employees are eligible for overtime from $23,660 to $47,496 and puts in place a mechanism to make automatic adjustments to that threshold every three years, starting in 2020. (The DOL had originally proposed the threshold be altered every year.) 

Workers above this threshold also are eligible for overtime if their duties aren't executive, administrative or professional. For those workers, called “highly compensated employees” (generally higher paid executive assistants and other administrative workers), the threshold at which they are exempt from overtime regulations will increase from $100,000 annually to $134,000. 

Finally, the rule will allow bonuses and commissions to satisfy 10 percent of the minimum salary threshold and will allow bonuses and commissions to be paid quarterly. 

Although these changes are significant—the Obama administration estimates they will make an additional 4.2 million workers eligible for overtime—the DOL did not change its “duties test” for the executive, administrative, and professional employees, which it had originally proposed to do. (MSCI had opposed any change in the duties test.) 

Generally, new regulations take effect 60 to 90 days after they are published in the Federal Register, but the DOL has granted employers six months, until Dec. 1, 2016, to implement the regulation. Because of the significant costs this rule will impose on employers, MSCI opposes it and supports efforts underway in Congress to force DOL to rewrite its rule. 

With our partners at the Coalition for the Democratic Workplace, MSCI is also looking for employers and employees who would be willing to speak on the record to the media about the impact of the rule. Please contact MSCI if you are interested in telling your story. 

To explore how this regulation might affect small employers, read this post from the Competitive Enterprise Institute