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JULY 2015

THE COUNCIL OF STATE GOVERNMENTS

CAPITOL RESEARCH
FISCAL & ECONOMIC DEVELOPMENT POLICY

State by State: New Proposed Overtime Rules


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-anda-half for any hours worked over 40 per week.
The law exempts a group of executive, administrative and professional employees from this
rulegenerally referred to as white collar workerswho satisfy certain job duties and receive a
minimum weekly salary or salary level threshold.
While originally designed to exempt well-compensated professionals, the salary level threshold has
been updated only once since the 1970sin 2004
and 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 regulatory 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 Council of State Governments

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 workers 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 states
California, Florida, Illinois, New York and
Texasmake up more than one-third of the total
number of affected workers nationwide.

States with smaller populationssuch as Alaska,


North Dakota, South Dakota, Vermont and Wyomingwould each see 10,000 or fewer workers
affected by the change.

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.

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.

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,


jburnett@csg.org
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

THE COUNCIL OF STATE GOVERNMENTS

WORKERS AFFECTED BY PROPOSED OVERTIME RULE CHANGES


Number of affected
workers in 2016

Percentage of affected
workers nationally

Affected workers
as a share of total
employed

4,680,000

100%

3.3%

Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota

70,000
10,000
100,000
50,000
420,000
80,000
40,000
20,000
10,000
370,000
160,000
20,000
20,000
200,000
100,000
50,000
40,000
70,000
70,000
20,000
100,000
110,000
100,000
90,000
40,000
110,000
10,000
30,000
40,000
20,000
130,000
20,000
290,000
160,000
10,000

1.4%
0.2%
2.2%
1.0%
8.9%
1.7%
0.9%
0.3%
0.3%
8.0%
3.4%
0.3%
0.4%
4.4%
2.2%
1.1%
0.9%
1.4%
1.5%
0.4%
2.0%
2.3%
2.1%
2.0%
0.9%
2.3%
0.3%
0.7%
0.8%
0.5%
2.9%
0.4%
6.2%
3.5%
0.3%

3.2%
2.5%
3.7%
4.0%
2.5%
3.2%
2.5%
3.6%
3.7%
4.2%
3.7%
2.5%
2.8%
3.4%
3.4%
3.3%
2.9%
3.4%
3.5%
3.1%
3.3%
3.3%
2.3%
3.2%
3.7%
3.8%
2.4%
3.4%
2.9%
3.5%
3.2%
2.2%
3.3%
3.8%
3.5%

Ohio

160,000

3.3%

2.9%

Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

70,000
50,000
200,000
10,000
70,000
10,000
120,000
400,000
40,000
10,000
140,000
90,000
20,000
80,000
10,000

1.6%
1.2%
4.2%
0.3%
1.6%
0.2%
2.5%
8.5%
0.9%
0.2%
3.0%
1.9%
0.4%
1.6%
0.2%

4.4%
3.1%
3.3%
2.9%
3.7%
2.7%
4.1%
3.3%
3.1%
3.2%
3.5%
2.8%
2.7%
2.7%
2.5%

State
United States

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

THE COUNCIL OF STATE GOVERNMENTS

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