Every employee should know what their rights are, especially when it comes to their wages and salary. The federal government just released new proposed regulations that will make more than 5 million employees eligible for overtime pay. So, starting from the beginning, who creates these regulations? Why is overtime a good thing? How will this affect my pay?
The country’s labor and employment laws are governed by the United States Department of Labor, a part of the federal government. Within the US Department of Labor, there are various divisions that focus on particular parts of labor laws. For today’s discussion, we’ll use the WHD as an example. The WHD stands for the Wage and Hour Division, and its governing doctrine or act is the FLSA (Fair Labor and Standards Act).
The WHD and FLSA establishes national minimum wage rates, overtime regulations, etc. States must first abide by the FLSA and then can implement any other statewide regulations on top of the national law. (i.e. state minimum wages can be higher than the national minimum wage).
In California, we have our own state department of labor, aptly named the California Department of Industrial Relations. Within the CA DIR, wage and hour regulations are enforced by the Division of Labor Standards Enforcement (known commonly as the Labor Commissioner). Their governing doctrine or act is the Industrial Welfare Commission Wage Orders. The Wage Orders outline similar regulations as the FLSA but with California labor law.
Now that the background is out of the way, let’s discuss the regulation changes that the FLSA will enact which will lead to changes on the state level as well. In the workforce, there are two main classifications for wage earners: hourly, non-exempt or salary, exempt. The former is paid on an hourly basis and is eligible to get paid overtime for any hours worked over eight in a day and/or forty in a week.
An employee’s job description has to meet a duties test, among other things, to determine whether or not they are exempt from overtime (and therefore on a salary). If the employee meets that exemption, then the employee must also be paid a minimum threshold for salaried employees; in California, it’s approximately $37,000 per year and nationally, it was $23,660. Last week, this all changed.
On Monday, June 29, 2015, the WHD released a new proposal to amend the FLSA and increase the base salary requirement for exempt employees. The requirement could jump from $23,660 to as much as $50,440. So what does this mean?
If you a salaried, exempt worker, it could mean a couple of outcomes. First, you might be reclassified into being a non-exempt worker, which means you are eligible for overtime. So for all of you salaried workers out there that were working more than 40 hours a week or 8 hours in a day and not receiving overtime because you were exempt, you may be getting paid your extra hours worked. The other scenario is that you stay exempt, but are given a raise to meet the threshold—in California, that may be close to a $13,000 raise! Almost five million workers can be affected as a result of this proposal.