Lower income workers catch a break

New overtime rules restrict bosses’ demands for extra hours

overtime

According to the U.S. Department of Labor, in order to ensure that low-paid employees are covered by the protections of the Fair Labor Standards Act’s overtime law, the Department of Labor (DOL) mandates that workers must be paid time-and-a-half for every hour worked over 40 in a week, unless they qualify as an executive, administrator, or professional employee.

In order to qualify for that exemption, a worker must make more than a salary threshold set by the DOL and have sufficiently independent, high-level, and consequential duties, such that they truly are an executive, administrator, or professional worker.

That salary threshold currently sits at $23,660 a year, but on December 1, 2016, it will be raised to $47,476 a year. What do these changes mean for our community and employers?

The updates will impact 4.2 million workers who will either gain new overtime protections or get a raise to the new salary threshold. So who are these workers?

More than half — 56 percent — are women, which translates into 2.4 million women either gaining overtime protections or getting a raise to the new threshold as a result of the rule. More than half — 53 percent — of affected workers have at least a four-year college degree, and more than three in five (61 percent) are age 35 or older.

And, 1.5 million are parents of children under 18, which translates into 2.5 million children seeing at least one parent gain overtime protections or get a raise to the new threshold. Impact by racial demographic data will be available prior to December 1, 2016.

Overtime and employer options

Unless specifically exempted, employees covered by the Act must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rates of pay. This is referred to as “overtime” pay.

Employers have a range of options for responding to the updated standard salary level. For each affected employee newly entitled to overtime pay, employers may:

  • Increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
  • Pay an overtime premium of one-and-a-half times the employee’s regular rate of pay for any overtime hours worked;
  • Reduce or eliminate overtime hours;
  • Reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or
  • Use some combination of these responses.

Impact of changes on workers

The circumstances of each affected employee will likely impact how employers respond to this Final Rule. For example, employers may be more likely to give raises to employees who regularly work overtime and earn slightly below the new standard salary level, in order to maintain their overtime-exempt status so that the employer does not have to pay the overtime premium. For employees who rarely or almost never work overtime hours, employers may simply choose to pay the overtime premium whenever necessary. The Department accounted for these (and other) possible employer responses in estimating the likely costs, benefits, and transfers of the Final Rule.

Nothing in the rule requires employers to change employees’ pay to hourly from salaried, even if the employees’ classification changes from exempt to overtime eligible. Employers may choose options number two through four while continuing to pay newly overtime eligible employees on a salaried basis.

Who benefits from the changes?

According to a recent New York Times article, supporters of the new rule see many benefits, saying it will rein in an overly workaholic atmosphere and perhaps diversify a rarefied world that tends to be White and upscale, thanks to its reliance on social connections and the difficulty of working for scraps without affluent parents. By making it harder for employers to demand extra hours as part of the job, the overtime rule is an important tool to shift the balance of power towards working people.

According to Lowell Peterson, executive director of the Writers Guild of America, East, which represents writers in movies, television and digital media, the model is very much alive and well in Hollywood as well. Peterson states, “Being a writer’s assistant is often the way people get into the business of writing for a living” for television.

The same goes for politics, according to Raelynn Olson, the managing partner of GMMB, which led the team that produced ads for both of Barack Obama’s presidential campaigns. “Many of the firm’s senior leaders began their careers in entry-level positions here, including a number of our partners,” Olson stated.

Still have questions? Check out the U.S. Department of Labor’s website: www.dol.gov.

 

Tammy McIntyre, M.Ed. welcomes reader responses to mcintyre_tammy@rocketmail.com.