By Noam Scheiber | The New York Times
President Obama announced Monday night a rule change that would make millions more Americans eligible for overtime pay.
The rule would raise the salary threshold below which workers automatically qualify for time-and-a-half overtime wages to $50,440 a year from $23,660, according to an op-ed article by the president in The Huffington Post.
“Right now, too many Americans are working long days for less pay than they deserve,” the president wrote.
Analysis by Rose Law Group Employment Law Attorney David Weissman:
The Administration’s aim is help more middle-income workers qualify for overtime. It will put an additional 4.6 million U.S. workers under federal overtime pay rules.
The White House announced a proposed rule change this week to expand which salaried workers can qualify for overtime pay if they work more than 40 hours per week. The current threshold is only $23,660 per year.
Raising the annual salary threshold for salaried-exempt status from $23,660 to $50,440, as is being proposed by the U.S. Department of Labor, could have significant ramifications for employers and employees alike.
Millions of Americans who were not previously eligible for overtime pay would be required to be paid at 1.5 times their hourly rate for all hours worked over 40 per week. For many of these salaried employees, that could amount to a substantial number of hours and would result in much higher labor costs for employers.
Rather than incur those costs, employers are likely to take various actions to maintain current wage expenditures. This includes raising salaries to just over the threshold for those who are now close to the line, which would avoid the overtime obligation altogether (assuming the employee’s job duties otherwise fall within an exempt classification), lowering salaries to an amount that would cause the employee to end up at their previous compensation level when overtime is factored in, changing salaried workers to an hourly rate of pay, or perhaps dividing one full time position into two part time positions to ensure there is no overtime obligation (which could also lead to a loss of certain benefits for those employees). If implemented, the proposed changes will also likely lead to more burdensome record-keeping requirements and payroll administration, scheduling challenges, and issues with employee relations and morale.
One silver lining that may come out of this change, though, is that it will create more of a bright line test as to which employees are exempt from overtime pay and which are not based purely on an objective criteria – salary amount – which could lead to a decrease in the volume of wage and hour litigation over an employee’s status.
For example, right now an employee who makes $35K per year and is in a quasi-management role (e.g., an assistant manager at a coffee shop) working 60 hours a week might file suit seeking overtime pay, claiming that his or her position is not within the “white collar” exemption for management level employees. his involves a multi-factored analysis including various subjective criteria related to the employee’s job duties, and creates uncertainly for both the employer and the employee. However, under the proposed change there would be no question that this employee is not exempt, regardless of his or her duties, which eliminates the need for a court to resolve this issue.
Also: Arizona Settles Cases With Relatives of 19 Who Died Fighting Wildfire/The New York Times
