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New white-collar OT rules could be out soon

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in Human Resources,Overtime Labor Laws

by Paul Legrady

The long-awaited rewrite of federal rules governing overtime pay for salaried executive, administrative and professional employees inched closer to enactment on May 5, when the U.S. Department of Labor forwarded a proposed final version to the Office of Management and Budget (OMB), which assesses the fiscal impact of government initiatives.

OMB’s review is one of the last hurdles federal regulations must clear before they are considered ready for public comment and eventual implementation. The review usually takes 30 to 60 days. The rulemaking process began more than a year ago.

In March 2014, President Obama ordered the DOL to “update and modernize” the Fair Labor Standards Act’s (FLSA) executive, administrative and professional exemptions so more managers would qualify for overtime.

The current threshold, set in 2004, is $455 per week ($23,660 per year), up from a $250 per week salary basis set in 1975.

Three numbers dominate speculation about the new salary basis. Depending on who is guessing, the new rules will make managers eligible for overtime if they earn less than one of these annual salaries:

  • $42,000 per year, which would make 3.5 million more salaried employees (about 35%) eligible for overtime.
  • $51,000 per year, equal to 1975’s $250 per week when adjusted for 40 years of inflation. It would grant overtime pay to 6.1 million more employees—some 47% of salaried employees.
  • $69,000 per year, which would cover the same percentage of workers—about 65%—who were entitled to overtime in 1975. It would increase by 10.4 million the number of workers entitled to OT pay.

The smart money is betting on a salary basis at the lower end of that range—but Washington regularly confounds smart bettors.

Assuming OMB signs off on the new rules, a public comment period will follow, and they could become official by late summer.

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