Redefining Jobs Down: Managers, Salaried Workers and Overtime Pay

Issue Briefs | Work & Wages

No. 181
Friday, December 04, 2015
by Jacob Kohlhepp

In 2016, millions of professional and salaried American workers will be effectively reclassified as hourly workers and eligible for mandatory overtime pay due to a change in U.S. Department of Labor regulations.

While many welcome this change as a victory for higher wages, upward mobility could be hurt by limiting workplace flexibility and employment options for those trying to climb the income ladder.

New Overtime Pay Regulations

The Fair Labor Standards Act (FLSA) requires employers to pay “nonexempt” workers 1.5 times the employee’s hourly rate of pay (or the hourly equivalent if the worker receives a salary) for all hours worked in excess of 40 per week. U.S. Department of Labor regulations under the FLSA define the job duties of employees who are exempt from overtime pay. The “duties test” exempts employees who are executive, professional or administrative and also work independently, exercising their own judgment without close supervision. Labor Department regulations also set the minimum salary level an employee must receive in order to be exempted from overtime pay. The change in federal overtime regulations increases the minimum salary an employee must earn to be exempt from $455 a week in 2015 to $970 a week in 2016. 

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