Approximately five million salaried workers may benefit from new overtime rules that are to take effect in 2016. Those who would become eligible for overtime pay of time-and-a-half include workers earning up to $50,440 per year.
Under current law, which has been in effect since 2004, salaried workers whose earnings exceed $23,660 annually, or $455 weekly, are exempt from overtime pay if they have managerial responsibilities. Thus, current law incentivizes employers to label salaried workers as “managers” so that the employer doesn’t have to pay those workers overtime.
Under the proposed legislation, the threshold at which several salaried employees would stop receiving overtime pay would more than double. The new law would automatically amend the suggested salary threshold on the basis of inflation or the rate at which wages increase. The legislation is reminiscent of a time when many more salaried workers were eligible for overtime pay. According to the Economic Policy Institute, in 1975, approximately 62% of salaried workers could receive overtime pay. By contrast, in 2014, only 8% of salaried workers were eligible.
Many workers in managerial positions are pleased with the proposed overtime rules, which means that they would be compensated for the 80 or 90 hours that they work during any given week. However, business groups are against any change to overtime rules because they claim that such an alteration would cause an increase in companies’ expenses, adversely affect customer service, and make it difficult for workers to move to a higher position.
According to Neil Trautwein, a vice president at the National Retail Federation, managers’ hours may be reduced so that they would not be paid overtime, and they would be unable to work additional hours or help out when the need arises. They would also have fewer chances to stand out from the other employees. In addition, the National Retail Federation believes that in response to the new overtime rules, companies will implement certain measures in an effort to lower their costs. Among these are: compensation to several lower-paid white collar workers on an hourly basis; reducing their pay; and decreasing their hours or benefits.
Nevertheless, in limiting the hours that managers work in order to reduce overtime pay, more workers may need to be hired. Thus, the proposed rules will likely increase job creation, and give workers the impression that they are being compensated fairly, and no longer left with the feeling of being overworked and underpaid.