Policy Institute (EPI) has released a report on the final overtime
rules published by the U.S. Department of Labor (DoL) last April. EPI has argued before
that, if adopted, these overtime regulations would mean "lower pay
[and] longer hours for millions of workers". These charges are
simply untrue. The new regulation will, in fact, improve overtime
protections for employees.
regulation is antiquated.
Before a worker
may be considered exempt for overtime, there are three tests that
must be met. First, the "salary-basis" test specifies that a worker
must be paid on a set salary; hourly employees who work more than
40 hours in a given work week are generally eligible for overtime.
Second, the "salary-level" test determines that any worker who
earns less than a certain salary is automatically eligible for
overtime, regardless of his or her job. Finally, a "duties test"
allows certain executive, administrative, and professional
employees to be exempt from overtime based on the kind of work they
The salary test
has not been updated in nearly 30 years, and the duties test has
gone even longer without any significant changes. One consequence
of the lack of updated rules is that the minimum salary needed for
a worker to be exempted from overtime is an absurdly low $155 per
work week. The new regulation would raise the salary test to $455
per work week: any worker paid less than $455 per work week (or
$23,660 per year) would automatically receive overtime protection,
regardless of job duties.
The new rules
mainly simplify the duties tests, but make few substantive
Under the current
rules, there are both short duties tests and long duties tests to
determine whether or not an employee is exempt from overtime. Which
test is administered depends on the employee's salary level. But
because of the failure to update the regulation, the long test has
become irrelevant and the "short test" applies to all workers
earning more than $13,000 per year. Under the new final rules, a
single "standard test" for each occupational category
(administrative, executive, and professional employees) replaces
all of the old tests.
rules are particularly valuable for low-level supervisors. Under
the current "short test," an "assistant manager" who regularly
supervises two other employees could be designated exempt from
overtime. Under the new rules, supervisors must have the authority
to hire and fire, or their suggestions in that arena must be given
"particular weight" in addition to the other managerial duties.
This is a significant tightening of the executive duties test that
will result in fewer exemptions.
for administrative and other office employees, employers will find
it more difficult to deny overtime under the new rules. The
regulation dictates that the employee, as part of his or her job
duties, must exercise "discretion and independent judgment with
respect to matters of significance."
The new duties
test for professional employees will have little, if any, effect on
who receives overtime. The current rules state that the primary
duty of a professional is "work requiring knowledge of an advanced
type" that is "customarily acquired by a prolonged course of
specialized intellectual instruction and study," which is the same
language used in the new rule. Both the old rule and the new rule
make a narrow exception for cases where substantial experience
exists, such as an attorney who did not attend law school. That
type of worker may still be considered a professional.
regulation means more employees will be eligible for overtime, not
In their new
study, EPI would have policymakers believe that some 6 million
white-collar employees would lose overtime protection were the new
overtime regulation adopted. This is based on the flawed premise
that many hourly workers would be converted to a salary-basis and
denied overtime. Because the overtime rules are either the same or
change so minimally, employers who would be inclined to attempt
this would have already done so.
to a forthcoming analysis by The Heritage Foundation, nearly 1.3
million currently exempted workers who earn between $155 and $455
per week would receive overtime protection under the new regulation
that they do not enjoy now. Because the new regulation makes it
more difficult to exempt administrative and executive employees,
more workers would be eligible for overtime protections.
workers who may lose overtime protections because of the new
regulation are certain individuals earning more than $100,000 per
year. Most of these workers are executives or professionals who are
not eligible for overtime, anyway. Even if all of these highly paid
employees lost their overtime protection-which is unlikely-only
about 272,000 workers would lose overtime, according to this same
Heritage study. A more reasonable estimate would be that around
100,000 highly compensated workers may lose their overtime.
The new overtime
regulation is a welcome modernization from the outdated rules that
employers must currently use. Contrary to the Economic Policy
Institute's assertions, the new regulation would ensure that more
employees enjoy overtime protections, not fewer.
Johnson, Ph.D., is Senior Policy Analyst in the Center for Data
Analysis, and Paul Kersey is Bradley Visiting Fellow in Labor
Policy, at The Heritage Foundation.