The Dawn of New Overtime Regulations
By: Kiersten Call
The validity of current overtime rules came into question back on March 13, 2014 when President Obama signed a presidential memorandum directing the Department of Labor to modernize overtime protections. Specifically, this memorandum stressed that millions of Americans lack the protections of overtime and even the right to the minimum wage. “Under current law, a salaried worker making as little as $23,660 a year can legally be asked to work more than 40 hours a week with no additional pay. The Obama administration says this violates the intent of the Fair Labor Standards Act.” The Department of Labor has responded with new standards that will become effective on December 1, 2016. However, these standards have not gone without opposition from both businesses and States alike.
The main component to the final rule is that it will raise the salary threshold from $23,660 to $47,476 a year in order to be ineligible for overtime pay. It is estimated that this will give 4.2 million workers overtime protections to which they were not entitled to previously. Additionally, this salary threshold will be evaluated every three years to ensure that it reflects the 40th percentile of weekly earnings of salaried workers. These changes were published on May 23, 2016, which gives businesses six months to become compliant with the new final rule. It is clear that this rule was designed to benefit the average worker by either giving them more free time from working fewer hours or compensating them for the hours they actually work. However, there are limited options for businesses in order to avoid paying employees overtime: 1) businesses can raise the salaries of their workers to comply with the new threshold, or 2) businesses can cut the hours of their employees to be below 40 hours weekly. Not only could this have the adverse effect of businesses returning their salaried employees back to the status of hourly employees, but this also places additional stress on already strained business budgets, as they now need to either hire more employees or pay more for the individuals they currently employ. Overall, the Department of Labor estimates that employers will need spend around $592.7 million to comply with these new regulations.
There has been great controversy over the Department of Labor’s final rule. Numerous businesses have stated that they feel that the drastic change in the salary threshold will only serve to harm businesses that rely on the work of their employees. In response to this, 21 states are planning to sue the Department of Labor to block the final rule claiming it is a clear government overreach. Additionally, there is a bill currently moving through Congress that would stall the overtime changes. The bill—H.R.6094—was introduced, passed by the House of Representatives, and is currently in the Senate awaiting review. This bill would serve to postpone the effective date of the final rule from December 1, 2016 to June 1, 2017. However, despite opposition and current efforts made, the final rule is still set to become effective on December 1, 2016.