I’m getting questions from both employers and employees after the recent announcement confirming the final Department of Labor overtime rule.
Anita, I have a small business with only 15 employees. Does this new overtime rule I’ve been hearing about affect me?
Hey Anita, How do I know if my company will start paying me overtime when the new law goes into effect?
In May, the Labor Department finalized an update to the overtime rule in the Federal Labor Standards Act (FLSA). The FSLA applies to any private, non-profit, or governmental agency doing $500,000 in business annually. Note that this update only affects “exempt” salaried employees, not hourly non-exempt workers who are already entitled to time-and-a-half overtime pay when working over 40 hours in a work week.
So who are these “exempt” employees? According to the FLSA, salaried workers who are employed as executive, administrative, professional, outside sales, or computer employees who meet the “duties test” are considered exempt from Sections 13(a)(1) and (17). And just throwing “Manager” into your title is not enough; it’s your actual job duties that count.
Starting December 1, 2016, the new FLSA overtime ruling more than doubles the overtime eligibility threshold for salaried employees from $455 salary per week ($23,660 yearly) to $913 weekly ($47,476 annually). This threshold will be updated every three years to help keep up with the cost of living.
As many as 4 million more workers will be eligible for overtime pay. But will that really mean a bigger paycheck for you come December? If you fall between the $455-$913 weekly gross amount, your employer may reclassify you as non-exempt. If that’s the case, you’d see an increase in your check if and when you put in more than 40 hours in a work week.
Employers may start monitoring hours more closely and not let exempt employees go over an 8-hour day to keep their budgets in check. In that case, you may won’t see an increase in your paycheck, but you may get bonus family time!
If you are just under the new $47,476 annual salary cap, your employer may decide to raise your base pay just enough to get you over the threshold and avoid having to pay you overtime. You may get a slightly larger paycheck, but depending on your actual overtime hours, a small raise may be less costly to your employer than overtime pay over the course of a year.
Some employers focusing solely on the bottom line may even lower base pay! While not illegal (if the hourly rate is still at least the federal and state minimum wage), it certainly won’t bode well for worker morale.
Employers have months to figure out their strategy for compliance with the new overtime standards. Economists and financial analysts disagree whether this will be good of bad for the American economy. Since the last salary threshold was set in 1975 – when gas was 57 cents a gallon! – I think the new overtime rule is long overdue.
“Exempt” Readers: Do you have any indication from your employer how the new FLSA overtime rule will affect you?
Business Owners: How do you plan to comply with the new overtime rule?
Do you have a job-related question? Ask Anita.
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