United States: Legislation Would Greatly Expand Number Of Employees Subject To Overtime

Last Updated: June 20 2014
Article by Michael J. Lotito and Ilyse W. Schuman

Two months after President Obama issued an Executive Order directing the Department of Labor to "modernize and streamline" the agency's "white collar" overtime exemption regulations governing the scope of the executive, administrative, professional, outside sales, and computer exemptions under the Fair Labor Standards Act (FLSA), Senate lawmakers have introduced legislation that builds on this idea. Sponsored by Sen. Tom Harkin (D-IA), Chairman of the Senate Committee on Health, Education, Labor and Pensions, the Restoring Overtime Pay for Working Americans Act (S. 2486) would entitle substantially more workers to overtime compensation, and establish recordkeeping penalties for employers.

The first portion of the bill would amend the salary thresholds that trigger the overtime exemption for executive, administrative, and professional employees. Specifically, the measure raises, in increments over a three-year period, the weekly compensation floor from $455 per week to $1,090 per week. Thereafter, the salary thresholds would be indexed to inflation. In other words, anyone making less than $56,680 per year would be entitled to overtime.

By the same token, the measure would increase from $100,000 to $125,000 the minimum annual salary level that would exempt highly-compensated employees from overtime eligibility. This increase would also be implemented over a three-year period, then indexed to inflation.

Additionally, the bill would revise the "primary duty" test used to evaluate whether a worker's duties are covered by the FLSA's overtime exemptions. The bill would require that an employee not spend more than 50% of his or her weekly work hours performing duties that are not covered by such exemptions. According to a press release on the legislation, "regulations issued in 2004 removed that 50 percent threshold, creating a loophole that allowed a worker to be exempt even if he or she only spends a few hours a week supervising or doing other exempt duties."

Finally, the bill would impose penalties on employers for failing to "make, keep, and preserve" records related to wages. The amount of penalties would be equivalent to those imposed for minimum wage or overtime violations, up to $1,100 if the violation is deemed willful or repeated.

While this bill's chance of passage is slim at best in the Senate and nonexistent in the House, it sets the stage for potential hearings and continued attention. The bill's introduction also sustains the Administration's "Opportunity for All" agenda, at least through the November elections. It will be interesting to see whether and to what extent the DOL's regulations on the same topic mirror the provisions set for in this bill.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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