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More salaried employees may be entitled to overtime pay if a new rule proposed by the U.S. Department of Labor goes into effect.
Currently, only salaried employees who are paid under $455 per week are eligible for federal overtime protections. The new rule would raise that threshold by nearly one-third.
What is a Salaried Employee?
A salary is not based on the actual number of hours that an employee works – so a salaried employee receives the same amount whether they are on the job for 10 hours or 50 hours in a given week. Examples are school teachers, executives, physicians under contract to a hospital, lawyers employed by a large firm or company and IT workers.
Who is Entitled to Overtime Pay Under Current Rules?
In general, the Fair Labor and Standards Act (FLSA) requires that employees who work more than 40 hours in a given week must be paid time and a half unless they are exempt. This also includes salaried workers who earn less than $455 per week, or $23,660 per year.
How is Overtime Calculated for Salaried Employees?
Generally, if a qualifying salaried employee works for more than 40 hours in a workweek, the worker’s weekly salary is divided by 40 (hours) in order to establish an hourly rate. Overtime is then calculated based on that figure; therefore, a worker who receives $400 a week is considered to make $10 per hour. If the salaried worker in question spends 50 hours on the job in a given week, those extra 10 hours must be paid at a rate of $15 per hour.
Who is Exempt?
Generally, employees who are considered exempt include professionals in white collar professions: highly paid executives, IT workers and commissioned sales people. If a position is considered to be “executive,” “administrative” or “professional,” then it is generally exempt from current overtime rules.
Other exempt workers include:
- transportation workers (railroad, airline and motor carrier employees as well as seamen on U.S.-registered vessels) whose pay is based on approved trip rates
- broadcast station employees (announcers, news editors and video engineers)
- “live-in” domestic workers (maids, butlers, personal chefs and chauffeurs, etc.)
- Movie theater employees
- Agricultural workers
These employees are not entitled to overtime pay except under certain circumstances.
How Would the New Rule Affect Overtime Eligibility?
Primarily, the new rule would raise the salary level for those entitled to overtime pay from the current $455 to $679 per week, or $35,308 per year. It would also affect those who are considered “highly compensated employees” (those making more than $100,000 per year), increasing the annual compensation requirement by over 47 percent.
Who Will Not be Affected by the New Rule?
Non-management employees who work on production lines or tradespeople in construction or building occupations and longshoremen will not be affected by changes in overtime protections. Additionally, the new rule would not apply to healthcare workers such as nurses and EMTs, police officers or firefighters.
