As long as the Fair Labors Standards Act (FLSA) has been in existence, American corporations, large and small, have looked for ways to avoid paying overtime to employees who are otherwise entitled to receive it. One of the most common tricks used by business is to “misclassify” and a worker who would otherwise be entitled to overtime as “exempt” from the overtime requirements of the law. “Exemption” is dependent upon the nature of the work performed by the employee and whether or not the employee is “salaried.” The salary threshold is extraordinarily modest, only $450 per week, or $23,660.00 per year. At such a low threshold, it has been very easy for employers who don’t want to do the right thing to pay an employee “salary” and then declare that employee exempt. This puts the employee in the position of having to prove that, even though they are salaried, the day to day work that they perform is not within one of the recognized exemptions to the law. It puts the employee in the position of having to file a lawsuit and carry the burden of proof on misclassification.
Finally, the Department of Labor seems to have recognized just how absurd the salary threshold of $450 per week is. The Department of Labor has just announced a proposed change to the rules, which would increase the salary threshold for exemption from the overtime requirements of the fair labor standards act from $455 per week to approximately $970 per week. It will be much more difficult for employers to play the game of paying someone a salary and then declaring them exempt when the salary has to be $50,000.00 per year instead of only 20s.
According to the Department of Labor, if the rule passes and the regulations are updated (which is supposed to happen in 2016), approximately 5 million American workers will benefit and will be entitled to receive overtime for the hours that they work over 40 in a week. I would call this a long overdue victory for American workers, except that it seems empty to declare “victory” in the face of the Department of Labor doing no more than catching the statute up to the real world. Let us now hope that this proposed rule change becomes an actual change to the rules next year.