Previously, the Fair Labor Standards Act required overtime pay for workers who earned up to $23,660 per year, or $455 per week.
The higher income threshold will make 4.2 million salaried workers eligible now for overtime pay, DOL says.
According to DOL, the final rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage census region, currently the South (the $913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004, up from $100,000); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
The effective date of the final rule is Dec. 1, 2016. The initial increase to the standard salary level will be effective on that date. Future automatic updates to that threshold will occur every three years, beginning Jan. 1, 2020.
“Our whole mission here is about strengthening and growing the middle class,” says Tom Perez, secretary of labor, in an interview with NPR. “In order to do that, we need to ensure that middle-class jobs pay middle-class wages.”
According to NPR, the new rule was more than two years in the making. DOL initially proposed an income threshold of more than $50,000 but scaled that back because of complaints that the proposed threshold did not reflect pay scales in low-wage parts of the United States. The new threshold will cover about 35 percent of salaried workers, Perez says.
Critics are urging Congress to block the new rule, NPR adds.