President Obama Announces FLSA Rule Change — More Workers Will Be Entitled to Overtime

The white collar exemptions to overtime pay — the Administrative, Professional, and Executive Exemptions — require among other things that the relevant worker be paid a fix minimum per week.  Currently that salary must be at least $23,660 per year (we discussed this issue in more detail here).  When that regulation was originally passed, $23,000 went a lot further than it does today.  On Monday June 29, 2015, President Obama announced his intent to increase that minimum salary to $50,440 per year.  These changes are not expect to go into effect until 2016.

Experts say that would restore the real dollar minimum to the same level as it was in 1975.  With this change, the Administration believes that some five million more workers will be entitled to overtime pay.  As happened when the Fair Labor Standards Act was originally passed, the expectation is that employers will respond by cutting hours to reduce their overtime costs.  This means that employees working 50, 60, even 70 hours a week, will likely see themselves working more reasonable hours.  Meanwhile, to fill the gap, employers will have to hire more workers.  The net effect should be to increase individual work productivity as fewer employees face fatigue, and at the same time reduce unemployment.  The latter will not only improve economic standing, but will ease the cost on government of unemployment insurance checks.

Officially business groups are objecting to the measure asserting that it will increase costs of doing business.  There is some accuracy to that charge in that an employer who had been paying employees more than $23,000 a year to work unlimited hours would now have to an hourly rate with time and a half for hours over 40.

However, while the salary exemptions are important when an employer cannot hire a different person to do a job — for example, a district manager for a retail chain cannot simply turn over his responsibilities when he hits 40 hours of work in a week — it has been decades, perhaps generations, since any such employee made less than $23,000.  The law was due for an update.

For those employees making between $23,000 and $50,000 who will now be entitled to overtime, employers will have the option of avoiding overtime costs by limiting them to 40 hours per week and hiring additional personnel.  This has the advantage of making working hours more tolerable for the employees who were overworked, while at the same time expanding employment.  And that was the intent and effect of the Fair Labor Standards Act when it was passed.

If you are making less than $50,000 a year in salary and working more than 40 hours a week, keep an eye on these rules. You may end up entitled to overtime.

With the complexity of overtime and wage laws, it is important to only consult with an attorney that has experience with wage and overtime theft. Contact Maduff & Maduff today for help with your employment law needs.