How many workers in your state could be affected by the proposed change in overtime rules?

The Department of Labor published a notice in the Federal Register today proposing a new rule that could extend overtime protections to almost 5 million additional workers as early as 2016. The law requires that employers pay overtime for non-salaried workers. Salaried employees are defined by a set of criteria, including job duties and a salary threshold. The new rules would more than double the salary threshold and tie it to inflation, which means more workers would qualify for overtime protections. 

Currently, the Fair Labor Standards Act (FLSA) requires most employers to pay employees at a rate of time-and-a-half for any hours worked over 40 per week.The law exempts a group of employees from this rule – executive, administrative and professional employees – generally referred to as “white collar” workers, which satisfy certain job duties and receive a minimum weekly salary or salary level threshold. While originally designed to exempt well-compensated professionals, the salary level threshold has only been updated once since the 1970’s – in 2004 – and has eroded over time thanks to inflation.

The salary threshold currently stands at $23,660 per year, which according to the White House, is below the poverty threshold for a family of four. The proposed new rule would raise that threshold to the 40th percentile of earnings for full-time salaried workers – or around $50,440 – and automatically update that threshold every year by some measure of inflation. The new rules don’t include any specific regulatory changes to the “duties test” that is used to determine whether a salaried worker earning more than the threshold is entitled to an exemption from overtime rules. 

The proposed changes are controversial. Opponents say that the changes could hurt the economic recovery and have unintended consequences – employers might cut back on hours or postpone raises to remain under the salary cutoff.

In an interview with PBS, David French, senior vice president at the National Retail Federation, voiced his concerns: “Our analysis says that instead of providing overtime for millions more workers, employers are going to make rational choices and they’re going to spread the same amount of money across a slightly larger pool of hourly and part-time workers.”

In the same interview, Secretary of Labor Thomas Perez countered, arguing these changes are well overdue. “…we’re taking these folks who are working 60, 70 hours a week and making $35,000 at the most and saying, that’s not fair. You should be compensated fairly, because they’re effectively working 10, 20 hours for free in some cases,” said Perez. “This is a rule about what it means to be middle class in America. Managers used to be middle-class jobs. And the president said, we want them to be middle-class jobs again.”

Workers aged 35-54 would be the largest group affected by the change: more than 2 million workers representing 44 percent of all those affected. In addition, over half of those affected by the new rule have a Bachelor’s or advanced degree.

The most populated states are also the states with the largest number of workers affected by the new rules. California, for example, will have about 420,000 workers affected by the change. Workers in the top five most populous states – California, Florida, Illinois, New York, Texas – make up over one-third of the total number of affected workers nationwide.  States with smaller populations, such as Alaska, North Dakota, South Dakota, Vermont and Wyoming, will each see 10,000 or fewer workers affected by the change.

Nationally, around 3.3 percent or 4.68 million of those employed will be affected by the rule change. However that percentage – the percentage of affected workers as a share of total employment within a particular state – varies across the country.

For example, 4.4 percent of those employed in Oklahoma will be affected – the highest percentage of any state – followed by Florida at 4.2 percent and Tennessee at 4.1 percent.  New Mexico has the smallest percentage affected – 2.2 percent of those employed – followed by Michigan with 2.3 percent and Montana with 2.4 percent.