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National Restaurant Association - President directs DOL to revise overtime-pay rules

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President directs DOL to revise overtime-pay rules

President Obama, in a first step toward a proposal that could ultimately allow millions of additional employees to qualify for overtime pay, signed a memorandum to Labor Secretary Thomas Perez March 13 asking the DOL to propose revisions to federal overtime regulations to reflect the “changing state of the workplace.”

The federal Fair Labor Standards Act requires employees to be paid time-and-a-half when they work more than 40 hours a week. The Department of Labor is in charge of writing the rules to explain who's exempt from overtime pay under the FLSA.

Under current DOL rules, employees who work in a "bona fide executive, administrative or professional capacity" are exempt from the FLSA’s overtime provisions. The DOL sets three tests an employee must meet to fit this classification:  (1) They must be paid a salary of at least $455 a week ($23,660 per year); (2) they must be paid on a "salary basis," and (3) they must pass a duties test that shows they qualify as executive/managerial, professional or administrative employees. DOL regulations spell out the fine print for the salary and duties tests. The National Restaurant Association's Legal Problem Solver summarizes the existing rules.

The Obama Administration has not said what changes it’s looking for, but indicates it’s trying to increase pay for millions of private-sector employees.

Any new regulation would have to go through a lengthy process that would require the DOL to solicit public comments on proposed changes.

The National Restaurant Association is tracking this issue closely. The overtime rules were significantly revised about 10 years ago, largely in an effort to make the rules clearer for both employers and employees. The issue has huge implications for all employers.

In his memorandum, the President said “regulations regarding exemptions from the Act's overtime requirement, particularly for executive, administrative, and professional employees … have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.”

Some states set different standards for overtime pay and overtime exemptions. Employers covered by both federal and state laws must follow whichever standards are most beneficial to the employee.


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