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States scramble to expand overtime eligibility

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Salaried restaurant employees earning less than $78,000 a year in New Jersey would be eligible for overtime pay by 2024 under a policy recommendation that’s about to be evaluated by state officials.

The proposal was aired on the same day Michigan Gov. Gretchen Whitmer called on regulators in her state to raise the threshold of overtime eligibility above the $35,568 federal exemption trigger that’s set to take effect Jan. 1. The governor did not recommend a new level for determining who qualifies for time and a half pay, but cited research showing that Michiganians need at least $61,000 in annual income to cover basic expenses. 

The states are the latest to consider setting their own rules for overtime pay instead of relying on federal regulations, which currently exempt salaried employees making $23,660 or more per year. The federal threshold has not been changed since 2004. The Obama administration had called for extending overtime pay to anyone earning less than $47,476, but the measure was struck down by a federal court over the way that number was determined. In late September, the Trump administration put forth a final proposal that entitles anyone making less than $37,568 annually to time and a half for hours exceeding 40 per week. 

The restaurant industry has commended the U.S. Department of Labor for its moderation in setting a new eligibility threshold of about $37,600. Even at that level, an additional 1.2 million Americans will qualify for overtime pay. 

Many states have contended that the new federal threshold is still too low. California has already enacted legislation that will mandate overtime pay as of 2022 for any salaried employee earning less than $62,400 per year. New York intends to gradually raise its exemption threshold to $58,500 in some parts of the state, and Pennsylvania announced plans last week to increase its exemption trigger to $45,500 by 2022.

Regulators and lawmakers in the state of Washington have called for entitling anyone making less than $79,872 to overtime pay, and Massachusetts and Maine are considering new triggers of $64,000 and $55,000, respectively. Colorado is also evaluating a change in its laws.

New Jersey became the latest addition to the list after an influential local think tank, New Jersey Policy Perspective, issued a report yesterday that argued for increasing the state’s exemption threshold to $78,000 within the next five years. By that time, New Jersey’s minimum wage will have climbed to $15 an hour. 

Gov. Phil Murphy has already directed the state Department of Labor and Workforce Development to begin drafting new guidelines, a spokesperson told NJ.com.

Overtime pay has become a thorny issue for restaurant employers, fueling widespread litigation to determine when salaried managers and supervisors are eligible for time and a half. In those suits, the plaintiffs typically argue that they are entitled to overtime pay because they perform the same nonmanagerial duties executed by hourly employees, for whom overtime pay is mandated for hours exceeding 40 per week.  

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