The Department of Labor formally announced a substantial change to federal overtime regulations. Specifically, the overtime threshold for employees in professional, administrative and management roles will increase from $23,660 to $47,476. This news was formally announced by Vice President Joe Biden, Labor Secretary Thomas Perez and Senator Sherrod Brown (D.-Ohio). The increase is expected to go into effect on December 1, 2016, barring Congressional action.
Labor groups and others applauded the move. Jared Bernstein, a former economist for Vice President Biden and a senior fellow at the Center on Budget and Policy Priorities, stated “[T]his is one of the most important measures that the Obama administration has implemented to help middle-wage workers.”
What are the practical implications for overtime wages?
According to the Department of Labor, the increased threshold is likely to impact approximately 4.2 million salaried employees across the United States. Businesses are likely to react to the increase in one of three ways.
- For qualifying employees who are already close to the threshold, employers may simply raise employee salaries in order to avoid having to pay overtime
- Alternately, employers will convert employees to hourly employees, who will then be required to track their time so they can receive proper amounts of overtime pay
- Employers may convert an employee from salaried to hourly and reduce an employee’s base pay in order to account for the overtime pay they will likely receive going forward.
Going forward, it will be worth watching to see how employers comply with these new regulations.
Anyone not receiving proper overtime pay has the right to bring a claim for unpaid overtime. Contact Alan lescht and Associates today if you believe your employer owes you overtime wages.
Sources: Millions more workers would be eligible for overtime pay under new federal rule, Jonnelle Marte, Washington Post, May 17, 2016