A sweeping set of changes to current federal law, expected to take effect Summer 2016, have courts across the country readying their dockets for more overtime lawsuits. Legal experts anticipate more wage and hour lawsuits in the new year than in 2015, which saw the largest amount on record at 8,871 legal claims.
New Year, New Rules: 2016 Changes To The FLSA
The Department of Labor (DOL) is considering several major changes to its guidelines. One of these changes has already gained considerable traction, including high-profile advocacy from President Obama.
Currently, salaried employees who make $23,660 or more per year aren’t entitled to overtime pay – so long as they perform legally exempt duties, like managing 2 or more other employees. The problem, of course, is that $23,660 isn’t what it used to be. In terms of what you can actually buy, that salary has lost about half of its value over the last 40 years.
Overtime regulations themselves weren’t passed to increase the pay of workers, according to the National Employment Law Project’s Judith Conti, who spoke with Business Insider in June 2015. The idea in 1938, when the Fair Labor Standards Act passed, was to force employers to adopt a standard 40-hour workweek. That goal was largely successful, since making people work over 40 hours got a lot more expensive. But actually increasing pay for millions of workers probably requires tweaks to the law, including the now-likely increase to the salary threshold.
If the DOL raises the threshold, and it’s very likely that the Department will, salaried workers making up to $50,440 every year will gain the right to overtime.
Update September 7, 2017 – Trump Administration Abandon’s Obama Plan To Expand Overtime Eligibility
No sweeping changes to the country’s overtime rules are coming anytime soon. While the Department of Labor under President Obama eventually adopted a new rule to double the salary threshold, President Trump’s labor agency proved far less progressive. The rule, challenged in a Texas federal court by business associations and state governments, has now been struck down by Judge Amos Mazzant. The Labor of Department has formally withdrawn its support for the rule, saying it has no intention to appeal Judge Mazzant’s decision. At least for now, the overtime salary threshold will remain set at $23,660 per year. You can learn more by following this link.
Will California Rule Take Hold Nationally?
Heralded by far less publicity, but potentially more game-changing, is a proposed national adoption of California’s current overtime law.
Currently, whether or not an employee is covered by one of the Fair Labor Standard Act’s “white collar exemptions” comes down to the kind of work they do. But it doesn’t take into account how much time they spend on other tasks.
California follows a different rule. In the Golden State, employees who spend more than 50% of their time performing non-exempt tasks are entitled to overtime, regardless of how much they make. That’s true even if the worker’s primary job fits into one of the classically exempt job descriptions: executive, administrator or professional.
The idea has many companies scrambling to change currently-salaried employees to an hourly wage, since the white collar exemptions don’t apply to hourly workers.
Can State Minimum Wage Hikes Prompt National Change?
In 14 states, the new year saw increases in the minimum wage. While the federal minimum wage ($7.25 per hour) hasn’t changed in more than 6 years, increases in major employment states like California and New York are sure to catch some businesses off guard.
Meanwhile, the Raise the Wage Act, proposed by Washington State’s Democratic Senator Patricia Murray, sits before the Committee on Health, Education, Labor, and Pensions. Introduced in April 2015, Raise the Wage would increase the federal minimum wage to $12 an hour over the course of 4 years.
Besides Murray, 32 Democrats currently support the bill, including Elizabeth Warren, the Senator from Massachusetts who has become an outspoken voice for labor reform. Fearing widespread job losses, Republicans continue to oppose any change in the federal minimum wage. In 2014, a study performed by the Congressional Research Service found that the minimum wage would need to be $10.69 to equal its purchasing power in 1968.
All these proposed changes have the legal community primed to file more wage and hour lawsuits than ever. It’s a situation that Fortune is calling “a perfect storm,” citing one attorney who said federal overtime actions could increase by 8% over their mark in 2015, already a historic high.