Overtime pay threshold for salaried workers could double

The U.S. Department of Labor has proposed a new rule that would extend overtime pay eligibility to nearly 5 million additional white-collar salaried workers nationwide, including many in The Woodlands area. The DOL is expected to make a final decision on the rule by July.

The rule would change the salary threshold for those who are exempt from receiving mandatory overtime pay. Currently, full-time salaried workers making $23,660 or more per year do not qualify for overtime pay. That salary level would change to $50,440 or more per year in 2016 under the proposed rule.

U.S. Rep. Kevin Brady, R-The Woodlands, said the proposed rule has the potential to hurt businesses and reduce mid-level employment opportunities.

“It certainly makes it harder for small businesses who are already struggling under higher taxes, ‘Obamacare’ and a lot of new red tape out of Washington,” Brady said. “This really hurts the people who were trying to move from the second to the third rung in the economic ladder. Opportunities for advancement normally come from salaried management and higher positions.”Overtime pay threshold for salaried workers could double

The DOL argues the rule would help workers receive fair compensation for their work as well as create hundreds of thousands of jobs by leading employers to hire part-time workers to take over excess hours their current full-time employees are working, said Ross Eisenbrey, Economic Policy Institute vice president and DOL expert.

“If [employers] think that paying time and a half for overtime is too expensive, the answer is don’t do it,” Eisenbrey said. “Don’t work people long hours. It’s bad for their families; it’s bad for their productivity; it’s bad for their health. It’s a bad idea.”

The DOL estimates 4.6 million employees currently exempt from overtime pay would receive overtime protection under the proposed rule, which the department says would help those workers receive fair compensation for their work.

The Woodlands area

According to The U.S. Census Bureau, the full-time, year-round civilian labor force in The Woodlands, Shenandoah and Oak Ridge North combined in 2014 was 36,844 people.

In The Woodlands, 35,028 workers were full-time and 25.6 percent of these workers make less than $50,000 in 2014. Oak Ridge North had 967 full-time workers and 35.1 percent made less than $50,000 in 2014. In Shenandoah, 849 workers were full time, and 40.7 percent of these workers made less than $50,000 in 2014, according to census data.

The estimated average household income in 2014 was $123,884 in The Woodlands area, which includes The Woodlands, Shenandoah and Oak Ridge North, according to The Woodlands Area Economic Development Partnership. The estimated average income in Montgomery County was $96,164.

“If the DOL adopts the proposed overtime pay legislation, we believe that it could affect employees in The Woodlands who work in a virtual office setting the most,” said Laura Lea Palmer, vice president of business retention and expansion for The Woodlands Area EDP. “This ruling could reduce the flexibility that some companies have offered their employees in the past. Some employers could eliminate working remotely all together in order to not have to rely on the self-reporting of overtime hours.”

Fair Labor Standards Act

In 2014, President Barack Obama signed a presidential memorandum directing the DOL to update its regulations that define which white-collar workers are protected under the Fair Labor Standards Act’s overtime rules. The FLSA, which was passed in 1938, establishes overtime and minimum-wage standards.

In response, the DOL sought to modernize and simplify its regulations and ultimately proposed changing the salary threshold in 2015.

“The basic rule under the Fair Labor Standards Act is that everybody is entitled to overtime,” Eisenbrey said. “The policy is that people shouldn’t work more than 40 hours a week. If they work over 40 hours a week, they should be paid extra, and that discourages employers from working people long hours because they do have to pay extra.”

The DOL has changed its salary threshold seven times since implementing overtime protections, with the last update taking place in 2004 when the salary level was changed to $23,660 per year. Before then, the salary levels had not been updated since 1975.

A DOL argument for updating the salary level is the 2004 threshold falls below the poverty level for a family of four, which is $24,250 per year.

In the past, the salary threshold has been a set number. This time, the proposed rule suggests changing the salary level to the 40th percentile of earnings, which would equate to $50,440 per year in 2016. The DOL also proposes updating the salary level every year.

The final decision

The DOL opened a comment period on the proposed rule from July 6-Sept. 4 last year. During that time, the department received more than 270,000 comments.

The DOL must review all of those comments before making a final decision this summer.

The proposed rule does not have to go before Congress because Congress has given the DOL authority to regulate policies related to labor. The president and the U.S. Office of Information & Regulatory Affairs may review the final rule prior to publication.

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