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Tuesday, 15 October, 2019

Objections Arise to the DOJ’s Minimal Overtime Pay Salary Threshold Increase

On Sept. 24, the DOJ finalized a plan to raise the white-collar overtime pay salary threshold from $23,660 to $35,568 going into effect on Jan. 1 2020. A 2004 change updated the job duties workers must perform to be considered exempt and raised the salary threshold to $23,660. The Obama administration sought to raise it to $47,476, but it was stopped by a federal court ruling in Texas.

To recap: For an employee to be denied overtime pay, the employee must make at least the salary threshold in yearly salary and satisfy certain job duties tests. If they do not make at least the salary threshold or do not meet all job duties tests, they are required to be paid 1.5x their regular rate of pay after working 40 hours in a work week.

So why did the DOJ raise the threshold half that amount three years later?

The short answer is that the Trump Administration simply don’t want as many workers to receive overtime pay as the Obama Administration did. The Department of Labor issued an increase to the salary threshold back in 2016, but a federal judge in Texas said it was beyond the scope of the FLSA because it afforded too many people the right to overtime pay. Subsequently, the DOL submitted a new proposal in March 2018. That proposal is the one that was approved on Sept. 24 and will go into effect on Jan. 1, 2020.

Recent objections have come from worker advocates who believe this 2020 threshold increase is too small to really impact the workers that aren’t making sustainable wages. Although this new threshold allegedly classifies an additional 1.3 million workers as eligible for overtime pay, it isn’t nearly close to the 4 million new eligible workers that the Obama administration had proposed. Worker advocates had also hoped that the test would be indexed to increase with inflation.  However, the Trump administration refused and instead simply mentioned that they hoped to revisit the test in future years to see if it should be raised.

Additional objections have been raised around the lack of review for the other two tests. As mentioned, there are three tests that a worker must satisfy to be exempt from receiving overtime pay, which are the duties test, salary basis test and salary level test. Stakeholders were hoping the job duties test would be revised as it was in 2004 to continue increasing the pool of overtime-eligible workers, in addition to revisions to the salary basis test, but the Trump Department of Labor did neither.

So what does this change mean for the future of labor and employment law reform?

Honestly, not as much as we would like. This change is in favor of workers, but it is HALF the amount that workers and stakeholders pushed for three years ago. It is the first actual increase since 2004 and there is no way to know if the next increase is going to take three years to implement after it is proposed again.  The DOL publicly claims that they will be proactive in changing the overtime eligibility tests more frequently, but they chose to not include a formal part in the proposal stating that the salary threshold would be automatically raised.

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