State by State: New Proposed Overtime Rules

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The U.S. Department of Labor has published a notice in the Federal Register proposing a new rule that could extend overtime protections to almost 5 million additional workers as early as 2016.1

Current law requires employers pay overtime for non-salaried workers. Salaried employees are defined by a set of criteria, including job duties and a salary threshold. The proposed new rule would more than double the salary threshold and tie it to inflation, which means more workers would qualify for overtime protections.

  • The Fair Labor Standards Act 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 executive, administrative and professional employees from this rule—generally referred to as “white collar” workers—who 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 been updated only once since the 1970s—in 2004—and has eroded over time due to inflation.
  • The salary threshold currently stands at $23,660 per year, which is below the poverty threshold for a family of four, according to the White House. Only 8 percent of full-time salaried workers earn below this level.
  • The proposed new rule would raise that threshold to the 40th percentile of earnings for full-time salaried workers—or around $50,440—and the threshold would automatically update every year by some measure of inflation.
  • The new rule doesn’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 number of workers that would be affected by the changes varies by age, education level and state; middle-aged, educated workers would see the biggest impact.

  • Workers ages 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, more than half of those affected by the new rule have a bachelor’s or advanced degree.
  • The most populated states would be most 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 and Texas—make up more than one-third of the total number of affected workers nationwide.
  • States with smaller populations—such as Alaska, North Dakota, South Dakota, Vermont and Wyoming—would each see 10,000 or fewer workers affected by the change.
  • Nationally, about 3.3 percent—or 4.68 million of those employed—would 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 would be affected—the highest percentage of any state—followed by Florida at 4.2 percent and Tennessee at 4.1 percent. 
  • New Mexico would have the smallest percentage affected—2.2 percent of those employed—followed by Michigan with 2.3 percent and Montana with 2.4 percent.

REFERENCES
1 The White House, Office of the Press Secretary. “FACT SHEET: Middle Class Economics Rewarding Hard Work by Restoring Overtime Pay.” June 30, 2015.
 

State by State: New Proposed Overtime Rules