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Change in Federal Overtime Law on the Horizon

Posted in Labor & Employment, News and Recent Decisions, Operating a Business

Employers, you may soon be required to dish out more overtime pay to your employees. On June 30, 2015, the Department of Labor released their plan to “modernize” the Fair Labor Standards Act’s overtime pay rules for salaried employees. Currently, employers are only required to pay time-and-one-half to “white-collar” salaried employees that make $23,660 or less per year (or $455 or less per week). The change in the law would more than double this salary threshold to require that all salaried “white-collar” employees making less than $50,440 per year must receive time-and-one-half  for overtime hours worked. The Department also proposed that this salary threshold would increase annually to match the consumer price index.

Not all employees making this amount are required to be paid extra for overtime hours, however. Only employees who are in executive, administrative, or professional positions and who are under the salary threshold must receive the additional overtime pay.  Under the current regulations, about 11% of salaried employees are eligible for overtime pay, but this change would increase this to about 40% of the salaried American workforce.  It’s estimated that over 5 million salaried workers currently earn more than the current threshold of $23,660 per year but also earn less than $50,440, entitling those individuals to overtime bonus pay for their overtime hours worked.

Of course, this will come at a cost to employers, forcing businesses who wish to avoid paying their employees time-and-a-half to choose between hiring additional staff to reduce overtime hours for full-time staff, or to pay qualifying employees a salary above the new threshold. It’s projected that the rule change will put an additional $1.2 to 1.3 billion in the pockets of these employees newly eligible for overtime pay. The Department of Labor has provided a site where public commentary can be made on this proposed change, where you can provide your input to the Department of Labor. You can comment online by going to the website, www.regulations.gov and posting on Regulatory Information Number (RIN) 1235-AA11.

Schober Schober & Mitchell, S.C. encourages you to contact us for advice in planning how your business will comply with this proposed rule.

This post was written by our law clerk, Jeremy Klang.