President Obama and the Dept of Labor formally released the details of the new Overtime Regulations the Obama administration is enforcing via Executive Order.

The government’s proposal would increase the standard salary threshold for the overtime exemption to $50,440 a year ($970 a week) and automatically update salary and compensation levels. The current threshold for overtime is $23,660  ($455/week) which was last increased in 2004 by the Bush administration.

The total annual compensation required to exempt highly compensated employees would increase to $122,148 a year from $100,000.

When enacted, the FLSA allowed for some Executive Branch rule changes without any Congressional approval. The Obama administration felt changes in the OT regulations were required to account for inflation, close the income gap between the upper and middle classes and increase the number of employees who deserve more pay for longer work days.

“The proposed rule would extend overtime protections to nearly 5 million white-collar workers within the first year of its implementation,” the Labor Department said  in its announcement June 30. They also noted that the new rules would include built in annual updates to the OT wage threshold as defined by the annual increase in the CPI.

The rules that determine if an employee is salary exempt or non-exempt are still in place. The Labor Dept regularly works on the rules that distinguish the difference between the two so that business owners have a clear understanding of those regulations. However, they are considering further clarification when these new overtime thresholds are formally enacted. In general, the rules defining exempt and non-exempt salaried employees revolve around how much management responsibility the employee has. Basically in order for an employee to be exempt from OT rules, they must spend more than 50% of their time performing management functions.

The proposed rules still need to go through a public comment period of 60 days. It is estimated that the new rules will become official in January of 2016 at the latest. It is also noted that because these new rules are being enforced through an Executive Order, the new President who takes office in 2018 could change the regulations and cancel the Order.

 

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