Overtime Pay

On Thursday, March 13, President Obama signed a Presidential Memorandum in which he ordered the Secretary of Labor to propose amendments to regulations that define the executive, administrative, and professional exemptions from the requirement that employees be paid overtime pay of least 1.5 times their regular pay rate for hours worked in excess of 40 hours per week.  The memorandum does not specify what the amendments should provide.

Today, salaried employees do not receive overtime pay if they earn at least $455 per week and engage in duties specified by the Labor Department's regulations.  For example, managers can be exempt "executives" if they regularly spend part of their work day supervising two or more other employees and have the authority to hire or fire or make recommendations regarding hiring, firing, advancement or promotions.  The $455 figure was set in 2004 (with inflation that would be $561 today).  The percentage of salaried workers who earn less than $455 per week has declined from 18% to 12% since 2004.  It is likely the Secretary of Labor will recommend that the weekly salary threshold be increased substantially (speculation is that the figure will rise to about $900), so the number of management employees at the lower end of the salary scale who qualify for overtime pay will increase substantially, probably by several million.  However, the Labor Department likely will propose its new overtime regulations this summer at the earliest and, if the rules proceed through the entire process, they would not take effect until one year thereafter or longer.  There will be substantial opposition from some management interests.

Minimum Wage

Earlier this year, the President proposed an increase in the minimum wage that would apply to all hourly workers.  He has asked Congress to increase the present federal hourly minimum wage from $7.25 to $10.10.  Congress has not enacted that proposal, although a Senate vote is expected in April.  Nonetheless, the President has already taken executive action to increase the minimum wage that must be paid for work performed under federal contract.  On February 12, 2014, the President issued an Executive Order increasing the minimum wage on federal contracts for services and construction entered into after that date to $10.10 per hour (with the increased wage to be paid for work performed after January 1, 2015, and increased thereafter for inflation every succeeding January 1).

The order increases the hourly cash minimum wage for "tipped employees" to $4.90 beginning January 1, 2015 with subsequent increases until their wage equals 70% of the minimum wage for other employees of federal contractors. As under existing law, if these employees' tips do not bring their pay to the level of the minimum wage, the employer must make up the difference.