Overtime pay is mandatory under federal law if you work more than 40 hours in a week and are not exempt from the Fair Labor Standards Act (proposed a change from $23,000 per year to $47,476 per year as the minimum salary for exemption, but a federal court struck that down late in 2016.FLSA). For the past few years, the Department of Labor has batted around ideas for raising the salary threshold for exempt employees. The Obama administration
The Trump administration didn't appeal and instead, set forth their own guidelines, proposing $35,308 as a minimum salary. That number may rise slightly, as median wages have increased and this proposal is based on median wages. The Department of Labor predicts that over 1 million people will be affected by this.
Employment attorney Brian Murphy predicted, back in March, when the increase was proposed, that this increase would survive a court challenge because it follows the same formula used in 2006, "aligning it to the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (then, and now, the South) and in the retail sector."
It looks like this might actually be a reality. If you're currently earning between $23,000 to $36,000 per year, as an exempt employee you may become eligible for overtime. Here's what you need to know.
It's Not Strictly Good News for Employees
An employer can require an exempt employee to work all the time without any extra pay. So, if you regularly go above 40 hours a week, you'd now be compensated with time and half for every hour over 40. (Keep in mind, we're talking about federal law and some states, notably California, have different thresholds.) But, employers don't suddenly have more cash to pay you. They may do any of the following things:
- Raise your salary to the new minimum (expected to be around $36,000) and keep the salary exemption.
- Limit your hours to 40 per week, imposing strict guidelines and punishments for working overtime. (They have to pay you for all hours worked, but they can fire you for going over 40 hours.)
- Adjust your hourly wage so that, even with overtime pay, you may earn the same amount you do now.
Exempt employees often receive flexibility that non-exempt employees don't have, precisely because of the need to track hours. You may see some of that go away.
The Duties Test Still Remains
It's not just about money; it's about what you do. A fast food cashier earning $50,000 a year is still eligible for overtime pay because her duties don't' qualify her for a salary exemption. On the other hand, a Human Resources Manager who runs programs and meets the duties test, but earns under $36,000 would be eligible for overtime.
The duties test is divided into 4 categories: Professional, Outside Sales, Managerial, and Administrative. It can be a bit complex to actually administer, but some guidelines are if the person managers two or more people, has an independent function, is an educated professional, or does outside sales, it's more likely that they qualify.
The salary change doesn't mean that everyone earning more than $36,000 will be eligible for overtime--they still have to meet the duties test.
The Big Winners May Be Part-Time Professional Employees
If you're working 50 percent at $36,000 a year, your full time equivalent salary would be $72,000. The FLSA doesn't make an exception for part time workers. So you may see a few exempt part-timers who will now be classified as non-exempt and eligible for overtime. While a part time person won't receive overtime pay regularly, what they will get is paid for all hours worked.
One of the struggles of part-time professional work is getting out of the office, off the phone, or shutting down the computer at 20ish hours each week. Now, they'll have to record their hours (until they reach the threshold), and will be paid every time someone says, "I know you're supposed to go home at noon, but can you just stay for another hour?"
Of course, this may discourage companies from hiring part-time professional employees, which would be sad, as it's a popular way to work--especially among women.
If you fall into this category of worker that may be affected, keep your ears open. I'll let you know when it goes into effect.