Gov’t Proposing FLSA Overtime Pay Changes

A federal proposal to change labor laws may entitle millions of U.S. workers to overtime pay; however, business leaders are warning that the additional labor rules would result in increased costs and burdens to businesses.

Vice President of White Castle Systems Jamie Richardson told the U.S. House Committee on Education and the Workforce on June 10 that “the new regulations will only result in more complicated laws.” The proposed regulations could also lead to more wage and hour lawsuits if companies delay compliance. White Castle workers currently make about $9.78 an hour on average. Richardson noted that should the proposed changes go into effect, White Castle restaurants would have to pay an extra $8 million to $12 million annually in salaries.

Federal Labor Laws Concerning Overtime Pay

The current federal Fair Labor Standards Act (FLSA) requires that employers must pay salaried employees who work over 40 hours a week and earn less than $455 a week, or $23,660 a year, time and a half for any overtime hours worked during the typical work week. Certain states, like California, have even more stringent labor laws. California labor laws require that if an employee works from 1 to 12 hours over 40 hours in a week, the employee is entitled to 1.5 times their hourly rate. If the employee works any hours beyond 52 hours in a week, the employee must receive double their hourly pay. Some types of workers are not eligible for overtime pay, including those with jobs classified as professional, administrative, or executive.

Many workers who make just slightly more than the income limit, or who are classified as exempt, end up working over 40 hours a week without any additional compensation. In order to remedy what some see as unfair labor practices, the U.S. Department of Labor has proposed raising the income threshold to $51,000 a year.

FLSA Needs Updates and Changes

According to former U.S. Deputy Secretary of Labor Seth Harris, raising the income limit would allow over 6 million additional workers to become eligible for overtime pay. Harris also asserted that raising the minimum income requirement to $51,000 would simply be akin to taking inflation into account, since the last minimum income adjustment occurred in 1975.

During the House overtime pay meeting, Rep.Tim Walberg, R-Mich. also voiced support for updating the FLSA, which was established in 1938. Since 1991, FLSA lawsuits (including overtime pay lawsuits, wage and hours lawsuits, and minimum wage lawsuits) filed in state and federal courts have increased by 514 percent.

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