On March 13, 2014, President Obama issued a presidential memorandum addressing overtime pay protections to help ensure that all workers are paid a fair wage for a hard day’s work. This memorandum is also aimed to making the current rules simpler for employers and workers.
The incentive behind the President’s initiative is to improve the rules that established the 40-hour workweek. Those rules eroded over the years – leaving millions of salaried workers without protections of overtime or sometimes even the minimum wage. The existing rules and laws regarding overtime and minimum wage are set forth in the Fair Labor Standards Act (“FLSA“), which protects over 135 million workers in more than 7.3 million workplaces nationwide. The FLSA established minimum wage, overtime pay, recordkeeping and youth employment standards affecting employees working in private companies, federal state agencies or local governments with fifteen or more employees. However, the FLSA contains a number of exceptions for exempt employees – who, as a consequence, are not allowed to overtime pay. Nonexempt employees covered under the FLSA are entitled to a minimum wage of $7.25 per hour. However, many states also have minimum wage laws and employees are entitled to the higher minimum wage if state and federal minimum wage are different. Under the FLSA, nonexempt employees who worked in excess of 40 hours per workweek must receive overtime pay at a rate of one and one-half times the regular rate of pay and there is no limit on the number of hours employees 16 years or older may work in any workweek. It should be noted that the FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days. Employees who are paid hourly or who earn below a certain salary are generally protected under the FLSA for overtime pay. Exempt employees are usually employees who perform executive, managerial or administrative duties. For instance, store managers and supervisors are exempt from overtime even though they usually work more than 40 hours in a given week.
President Obama wants to make the FLSA fairer and reach more employees, because currently “only 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975)” and “[m]any of the remaining 88 percent of salaried workers are ineligible for these protections because they fall within the white collar exemptions.”
The presidential memorandum instructs the Secretary of Labor to update regulations regarding who qualifies for overtime protection and suggests that the regulations could be revised to: i) update existing protections in keeping with the intention of the FLSA; ii) address the changing nature of the American workplace; and iii) simplify the overtime rules to make them easier for both workers and businesses to understand and apply.