Administration Proposes Major Changes to Overtime Rules

The U.S. Department of Labor published a proposal for sweeping changes to federal employment law in the Federal Register for Monday, July 6. The proposal by the Administration would extend overtime pay to as many as five million workers across the country by increasing the salary threshold for businesses to exempt employees from overtime pay. Under current law, which was updated most recently in 2004, salaried workers making more than $455 a week ($23,660 per year) were not automatically qualified for overtime pay. The new proposal by the Administration would extend eligibility to salaried workers making up to $970 a week ($50,440 per year) and then indexing that level to account for inflation going forward.

The Department of Labor declined to propose additional changes to the “duties test” that is currently used by employers (in addition to the salary threshold) in determining whether employees are exempt or non-exempt from overtime pay. The Department of Labor states in the proposed rulemaking that it believes the updated salary threshold provides the simplest test for employers to determine the status of their workers.

The U.S. Chamber of Commerce and the National Retail Federation (NRF) oppose the proposed changes on the grounds that employers will be forced to reclassify salaried workers as hourly employees, stripping workers of benefits and flexibility in the workplace. The NRF estimates that it will cost businesses nationwide over $874 million to update payroll systems and comply with new regulations. A separate NRF study estimates that (in the acknowledged unlikely scenario that businesses did not adjust worker hours, pay, or benefits) increasing the overtime wage threshold to $984 per week would cost restaurant and retail employers $9.5 billion per year.

The proposed rule is now open for public comment until September 4, 2015. In order for TIA’s response to this rulemaking to best reflect its impact on your businesses and compensation models, TIA needs your feedback. Please contact Will Sehestedt at or 703-299-5713 to let us know how these changes will impact you and your company.