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State by State: New Proposed Overtime Rules
JULY 2015
The Council of State Governments
CAPITOL RESEARCHFISCAL & ECONOMIC DEVELOPMENT POLICY
THE COUNCIL OF STATE GOVERNMENTS
The U.S. Department of Labor has published a notice in the
Federal Register proposing a new rule that could extend overtime
protections to almost 5 million additional workers as early as
2016.1
Current law requires employers pay overtime for non-salaried
workers. Salaried employees are defined by a set of criteria,
including job duties and a salary threshold. The proposed new rule
would more than double the salary threshold and tie it to
inflation, which means more workers would qualify for overtime
protections. The Fair Labor Standards Act requires most
employers to pay employees at a rate of time-and-a-half for any
hours worked over 40 per week.
The law exempts a group of executive, admin-istrative and
professional employees from this rulegenerally referred to as white
collar work-erswho satisfy certain job duties and receive a minimum
weekly salary or salary level threshold.
While originally designed to exempt well-compen-sated
professionals, the salary level threshold has been updated only
once since the 1970sin 2004and has eroded over time due to
inflation.
The salary threshold currently stands at $23,660 per year, which
is below the poverty threshold for a family of four, according to
the White House. Only 8 percent of full-time salaried workers earn
below this level.
The proposed new rule would raise that threshold to the 40th
percentile of earnings for full-time salaried workersor around
$50,440and the threshold would automatically update every year by
some measure of inflation.
The new rule doesnt include any specific regula-tory changes to
the duties test that is used to determine whether a salaried worker
earning more than the threshold is entitled to an exemption from
overtime rules.
The number of workers that would be affected by the changes
varies by age, education level and state; middle-aged, educated
workers would see the biggest impact. Workers ages 35-54 would be
the largest group
affected by the change: more than 2 million work-ers
representing 44 percent of all those affected. In addition, more
than half of those affected by the new rule have a bachelors or
advanced degree.
The most populated states would be most affected by the new
rules. California, for example, will have about 420,000 workers
affected by the change.
Workers in the top five most populous statesCalifornia, Florida,
Illinois, New York and Texasmake up more than one-third of the
total number of affected workers nationwide.
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2 THE COUNCIL OF STATE GOVERNMENTS
States with smaller populationssuch as Alaska, North Dakota,
South Dakota, Vermont and Wyo-mingwould each see 10,000 or fewer
workers affected by the change.
Nationally, about 3.3 percentor 4.68 million of those
employedwould be affected by the rule change. However, that
percentagethe percentage of affected workers as a share of total
employment within a particular statevaries across the country.
For example, 4.4 percent of those employed in Oklahoma would be
affectedthe highest percentage of any statefollowed by Florida at
4.2 percent and Tennessee at 4.1 percent.
New Mexico would have the smallest percentage affected2.2
percent of those employedfollowed by Michigan with 2.3 percent and
Montana with 2.4 percent.
Jennifer Burnett, Director, Fiscal & Economic Development
Policy, [email protected]
REFERENCES
1 The White House, Office of the Press Secretary. FACT SHEET:
Middle Class Economics Rewarding Hard Work by Restoring Overtime
Pay. June 30, 2015.
https://www.whitehouse.gov/the-press-office/2015/06/30/fact-sheet-middle-class-economics-rewarding-hard-work-restoring-overtime
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3THE COUNCIL OF STATE GOVERNMENTS
State Number of affected workers in 2016Percentage of
affected
workers nationally
Affected workers as a share of total
employedUnited States 4,680,000 100% 3.3%
Alabama 70,000 1.4% 3.2%Alaska 10,000 0.2% 2.5%Arizona 100,000
2.2% 3.7%Arkansas 50,000 1.0% 4.0%California 420,000 8.9%
2.5%Colorado 80,000 1.7% 3.2%Connecticut 40,000 0.9% 2.5%Delaware
20,000 0.3% 3.6%District of Columbia 10,000 0.3% 3.7%Florida
370,000 8.0% 4.2%Georgia 160,000 3.4% 3.7%Hawaii 20,000 0.3%
2.5%Idaho 20,000 0.4% 2.8%Illinois 200,000 4.4% 3.4%Indiana 100,000
2.2% 3.4%Iowa 50,000 1.1% 3.3%Kansas 40,000 0.9% 2.9%Kentucky
70,000 1.4% 3.4%Louisiana 70,000 1.5% 3.5%Maine 20,000 0.4%
3.1%Maryland 100,000 2.0% 3.3%Massachusetts 110,000 2.3%
3.3%Michigan 100,000 2.1% 2.3%Minnesota 90,000 2.0% 3.2%Mississippi
40,000 0.9% 3.7%Missouri 110,000 2.3% 3.8%Montana 10,000 0.3%
2.4%Nebraska 30,000 0.7% 3.4%Nevada 40,000 0.8% 2.9%New Hampshire
20,000 0.5% 3.5%New Jersey 130,000 2.9% 3.2%New Mexico 20,000 0.4%
2.2%New York 290,000 6.2% 3.3%North Carolina 160,000 3.5% 3.8%North
Dakota 10,000 0.3% 3.5%
Ohio 160,000 3.3% 2.9%
Oklahoma 70,000 1.6% 4.4%Oregon 50,000 1.2% 3.1%Pennsylvania
200,000 4.2% 3.3%Rhode Island 10,000 0.3% 2.9%South Carolina 70,000
1.6% 3.7%South Dakota 10,000 0.2% 2.7%Tennessee 120,000 2.5%
4.1%Texas 400,000 8.5% 3.3%Utah 40,000 0.9% 3.1%Vermont 10,000 0.2%
3.2%Virginia 140,000 3.0% 3.5%Washington 90,000 1.9% 2.8%West
Virginia 20,000 0.4% 2.7%Wisconsin 80,000 1.6% 2.7%Wyoming 10,000
0.2% 2.5%
Source: The White House, Office of the Press Secretary. FACT
SHEET: Middle Class Economics Rewarding Hard Work by Restoring
Overtime Pay. June 30, 2015.
https://www.whitehouse.gov/the-press-office/2015/06/30/fact-sheet-middle-class-economics-rewarding-hard-work-restoring-overtime
WORKERS AFFECTED BY PROPOSED OVERTIME RULE CHANGES