The Obama Administration earlier today announced new rules making millions of workers eligible for overtime pay effective December 1, 2016. The Labor Department put out new rules increasing the salary threshold from less than $23,660 to less than $47,476 for workers who clock in more than 40 hours a week. The new threshold will be updated every three years. On first blush, the new change looks like bigger paychecks for those who fall within the new guidelines but let’s give it a closer look.
- For employees who earn between $23,660 and $47,476, the rule makes them automatically eligible to receive overtime pay.
- Some employers may decide to give their employees a raise! Sounds great, well not so fast. If an employee’s salary is just under the $47,476 an employer may decide to increase the annual base salary to avoid paying overtime.
- Employers may take a hard line and start limiting employees to working 8 hours a day.
- Employers may opt to adjust hourly pay to offset paying time and a half. Keep in mind as long as hourly pay is at least minimum wage, the employer would be acting within the boundaries of the law.
- Highly compensated employees (HCEs) will see a salary threshold increase from $100,000 to $134,004. HCEs overtime eligibility will remain subject to what federal employment law calls the “duties test”.
- The duties test provides guidelines to determine whether an employee has some independent authority to make certain decisions. In those case, subject to guideline interpretation, HCEs may not be eligible for overtime pay.
For more information on the overtime pay rules, go to the Department of Labor website.