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Millions More Workers Are Eligible for Overtime-Does the New Federal Rule Change Apply to You?

Schwartz Perry & Heller LLP

Millions More Workers Are Eligible for Overtime—Does the New Federal Rule Change Apply to You?

Department of Labor is changing criteria for overtime

If you’ve been unable to get overtime pay because of your status as an exempt employee, the Department of Labor (DOL) may have some good news for you: About 4.2 million more workers will be eligible for overtime as of December 1st.

Of course, employers are likely to greet this news with less enthusiasm. Unfortunately, some companies that have been benefitting from outdated overtime rules may be likely to look for ways to avoid compensating workers at higher rates. Because issues related to wage and overtime laws may be confusing, some companies may count on the fact that not all workers are aware of their rights under the law.

That’s why it’s a good idea to know how the overtime changes may or may not impact you. Let’s discuss what the rule says, who it affects, and how employers are likely to react.

What the rule says

The new rule from the DOL goes into effect December 1st of this year. Until that time, employers are under no obligation to change their existing pay structures.

As of December, however, things may look dramatically different for some workers.

The rule change applies to exempt employees—that is, generally salaried employees who are exempt from, or ineligible for, overtime— and who make less $47,476 per year. Under the new rule, these workers will be eligible to receive overtime pay for any hours worked over forty in a given week.

Overtime pay must be calculated at 1.5 times an employee’s normal hourly pay.

Who will this impact?

Under the current system, employers are generally only required to pay overtime to exempt workers who make less than $23,660, and to non-exempt workers.

This means that companies have been able to avoid paying overtime by classifying employees as exempt and then paying them just slightly more than $23,660.

For example, under the current rule, a shift supervisor in a retail establishment may be classified as “exempt” because of his or her management duties. That person could be required to work more than 40 hours per week without receiving overtime pay. The upshot is that sometimes these so-called “managers” may end up making less than the people they supervise. In some cases, their average hourly compensation in a given week may even dip below minimum wage.

However, under the new rule, exempt employees who make less than $47,476 per year will be eligible for overtime pay.

What employers are likely to do

Does this rule change mean that 4.2 million workers are going to start bringing home a lot more money as of December 1st?

Some will, and some won’t.

Some exempt employees may receive increases to put their salaries over the $47,476 threshold. While these people may bring home more money than before the rule change, they will not be eligible to collect overtime if they work more than 40 hours in a week.

Some employees may have their hours cut. Rather than pay overtime, employers may hire additional staff or put pressure on employees to produce more in less time. While employees’ paychecks may remain largely the same, they may have to spend fewer hours on the job.

Some employees may lose their “exempt” status and be re-classified as hourly, or non-exempt, employees. This could mean a loss of paid vacation time or other benefits. However, it’s important to keep in mind that employee classification is not simply a matter of how an employer chooses to categorize an employee. Rather, the Fair Labor Standards Act (FLSA) spells out who may and may not be exempt from overtime. (See this fact sheet from the FLSA for more information.)

What It Means to You

Issues related to wages and overtime can be complicated. If you believe that you haven’t been compensated in accordance with the law, it’s a good idea to speak to an attorney to find out about your rights.

Call or email us today to discuss your unique situation.
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