September 29, 2023
Employers hate paying overtime. They hate having to pay time and a half to their workers. And many of them will do anything they can to avoid paying overtime to workers. One of the key strategies many employers use is to pay their workers a salary instead of an hourly wage. Until recently, if you were paid a salary of over $23,660.00, the employer could work you as much as they want without having to pay overtime.
In 2016, President Obama tried to raise the maximum salary an employee could make without being owed overtime to $47,476.00. That would have more than doubled the threshold amount and given millions of American workers overtime. Sadly, the Trump administration squashed that new rule before it could become a federal law. Instead, the Trump administration increased the threshold to $35,568.00, which only gave 3.6 million Americans a raise. While less than hoped, it was a significant improvement.
On August 30, 2023, the Biden Administration proposed a far more significant increase in the threshold. They proposed that anyone making less than $1,059 per week (approximately $55,000.00 annually) will be owed overtime. This change could make tens of millions of Americans eligible for overtime. This proposed rule still needs to make its way through the U.S. Department of Labor’s rulemaking procedure and it could take a year or more to finalize, but this massive change could increase worker pay and create more jobs and employers scale back salaried employees’ work so they avoid overtime.
The Economic Policy Institute has estimated that about 15 percent of full-time salaried workers are entitled to overtime pay under the current Trump policy. That’s compared to more than 60 percent in the 1970s. Under the new rule, 27 percent of salaried workers would be entitled to overtime pay according to the U.S. Department of Labor. Under the new rule, some 300,000 more manufacturing workers would be entitled to overtime pay, according to the Labor Department. A similar number of retail workers would be eligible, along with 180,000 hospitality and leisure workers, and 600,000 in the health care and social services sector. There is little doubt that big business and Republican lawmakers will attempt to stall this new law through litigation to avoid paying their workers more.
For employers to avoid paying overtime, their employees generally must meet certain tests regarding their job duties and be paid on a salary basis. The U.S. Department of Labor outlines the categories and the tests that must be met under the federal FLSA, which includes exempt salary information on:
If you are or know a salaried employee and do not fall into one of the exemptions above, you should expect a raise from the Biden Administration in a year or two. If you have any questions when the change arrives, please do not hesitate to contact the Hurm Law Firm for a free consultation at (216) 860-1922.