President Obama is expected to issue an executive order this week expanding the number of people who are eligible for overtime pay under the Fair Labor Standards Act (FLSA), the federal wage and hour law. The order is expected to direct the Department of Labor to raise the salary threshold required for the executive and professional exemptions from overtime under the FLSA.
Under these exemptions, employees are not entitled to overtime for hours worked over 40 in a work week if they are paid a salary of more than $455 per week and they meet certain duties tests. The salary threshold of $455 per week or $23,600 per year was set nearly 10 years ago in 2004. The Obama Administration has not commented on the increased salary threshold amount. The change would likely impact salaried workers such as fast-food shift supervisors, loan officers, or convenience store managers. Any change to the federal regulations would come after the Department of Labor solicits public comment.
Employers should take note of the expected change and analyze whether increasing salaries to preserve the exemptions or converting employees to hourly workers at reduced hourly rates and numbers of hours per week makes financial sense for their businesses.