By Noam Scheiber | The New York Times
The Obama administration, in a far-reaching effort to improve the lot of workers that has ignited criticism from business groups, announced on Tuesday that it was making millions more employees eligible for overtime pay.
Under the new regulation to be issued by the Labor Department on Wednesday, most salaried workers earning up to $47,476 a year must receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660.
“This new regulation being issued by the U.S. Department of Labor brings both good news and bad news for employers. The good news is that the final regulation is not quite as onerous as what had initially been proposed. Instead of raising the minimum salary for exemption from overtime pay to just north of $50,000, the threshold will be set at right around $47,500. Also, that amount will not be re-indexed annually as originally proposed, but instead will be adjusted every three years. Most significantly, the Department will not change the “duties test” for determining whether or not an employee is exempt (regardless of salary), which is a much more subjective analysis.
“That’s pretty much where the good news ends for employers. Companies will now have to pay an overtime rate to (nearly) all employees – white collar included – who earn a salary below the $47,476 threshold and work more than 40 hours in a given workweek. That threshold is significantly higher than the current $23,660 level, and has the potential to impact millions of employees around the country. This will lead to additional record-keeping requirements, increased scrutiny on employees’ schedules, and potentially more lawsuits alleging violations of federal overtime pay requirements. As a practical reality this may also mean that companies will decrease employees’ hours of work, decrease employees’ salaries to compensate for the additional overtime pay requirement, and raise salaries to just above the threshold to avoid the overtime requirement, among other reactions. Bottom line, this change may have negative consequences for both employers and employees.
“Employers with salaried-exempt (i.e., white collar) employees who earn less than the new $47,476 threshold are advised to consult with an employment law attorney to better understand the requirements of the DOL’s new regulation and adjust scheduling and compensation policies and procedures accordingly.”
~ David Weissman