Whether or not an employer must pay a worker overtime wages for working more than 40 hours per week depends on a complex series of rules. These rules, which determine which workers are “exempt” from overtime — that is, which workers must be paid time-and-a-half after 40 hours (“non-exempt” workers) and which workers don’t have to be paid extra (“exempt” workers) — may be about to change by the federal Department of Labor (DOL). The implications for the labor market could be quite profound.
The “White Collar” Exemption
One set of rules, aimed at white collar workers, hinges, in part, on the amount of a worker’s annual salary. Currently, federal law classifies workers as exempt (not having to be paid overtime) if these two conditions are met: (1) they receive a salary (not an hourly wage) that is at least $23,600 per year ($455 per week), and (2) their job is primarily executive, professional, or administrative. Recently, the DOL has proposed raising that minimum salary.
Why the Law May Change
The $23,600 salary minimum for the “white collar” exemption has not been adjusted for inflation; it has only been increased once since 1975; and that increase was small. As a result of inflation, a $23,600 salary buys far less now than it did 40 years ago, and many labor economists argue that this amount no longer constitutes a reasonable cut-off point for overtime exemption. The DOL’s proposal would raise the minimum to a floating amount equal to the 40th percentile of full-time salaried workers in the U.S. For 2016, that is projected to be an annual salary of $50,440 ($970 per week).
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