Department of Labor Proposes Changes to Overtime Exemption Laws

The US Department of Labor Announces Proposed Changes to Overtime Laws Under the FLSA
The federal overtime laws are commonly referred to as the FLSA. The FLSA determines when an employee must be paid overtime.  Overtime, under the FLSA, is defined as hours worked over 40 in a seven day period called the workweek.  Where an employee works overtime, the employer is required to pay 1 1/2 times the regular hourly rate for those hours worked in excess of 40 hours in a single workweek.

An employee, under very specific circumstances, can be “exempt” from the overtime laws of the FLSA.  An employee who is exempt, is not entitled to overtime wages.  These exemptions are limited and narrowly viewed against the employer and for the employee being entitled to their overtime wages.  One of the most common exemptions is the managerial exemption.  There are specific duties the employee must perform to fit within the managerial exemption.  In addition, to be exempt under the managerial exemption, the employee must be a “highly compensated” employee and paid a salary.  Under the current FLSA, this means that the employee must be paid $455 per week, or $23,660 per year.

The Department of Labor is proposing to change the salary amount.  DOL Website. It recognizes that an employee making $455 per week is not a highly compensated employee, but instead, is being paid poverty wages.  The DOL is considering increasing the salary amount to $970 per week, or $50,440 per year. Under the proposed changes, any manager not making $50,440 per year would likely be entitled to overtime wages when they work more than 40 hours per week. This stops employers from working their assistant managers 60 hours per week and paying the $455, or the equivalent of $7.58 per hour. Under Oregon or Washington laws, this is not even minimum wage. It also means that the supervisor is getting paid several dollars less per hour, assuming no minimum wage violations, than the employees they supervise. However, under the new proposed changes, the manager would make $970 per week, $16.16 per hour, well above the minimum wage. Alternatively, the employer can pay the person at an hourly rate and pay overtime wages if they work more than 40 hours in a single work week. At the Oregon minimum wage, the same 60 hour per week worker would receive 40 hours at minimum wage ($370), plus 20 hours at their overtime rate ($277.50) for a total of $647.50. This is $192.50 more than the old salary rate of $455.

This is an important break through for many restaurant and retail management staff. The employer is required to either pay a significantly higher salary making it worth the employee’s time to work the long hours, or pay overtime for the hours worked. Where the employer does not pay the employee the correct salary, the employee can sue for the unpaid overtime. This type of claim is commonly referred to as a wage claim, or overtime wage claim. In addition to the unpaid overtime wages, the employee could receive up to double the amount of unpaid overtime. The FLSA also requires the employer to pay the employee’s attorney fees in an overtime wage claim lawsuit. This is important because it allows Schuck Law to take FLSA overtime wage claim lawsuits on a contingency fee basis, essentially being paid by the employer to win the employee’s overtime wage claim lawsuit.

Once this change in overtime law passes, it is unclear whether states like Oregon and Washington are going to change their overtime exemption. Oregon Exemption. Will they match the salary requirement of the FLSA? Or will their overtime exemption remain the same? Oregon requires the employer to adhere to the wage and hour laws, including overtime laws, which are most favorable to the employee. OAR 839-020-0115. In any event, this is an advancement that has long been overdue.

Google By David Schuck

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