A major change in federal labor law means millions of additional Americans will qualify for overtime pay. Under the changes to the Fair Labor Standards Act, the threshold at which executive, administrative, and professional employees are exempt from overtime pay essentially doubles from the current $23,660 to $47,476. That is expected to make 4.2 million additional workers eligible to receive time-and-a-half wages for each hour they put in beyond forty hours a week.
The Labor Department said these changes were needed because the current threshold was “eroded by inflation every year” and because too many Americans “have been left working long hours for no additional pay.” The Labor Department estimates the change will boost workers’ wages by $12 billion over the next ten years. Since the new rule calls for the income threshold to be updated every three years based on inflation, the department projects the threshold could rise to more than $51,000 by 2020.
Critics say the new requirements will result in an increased cost to some businesses and some companies will probably reduce workers’ hours or hire fewer employees. Additionally, many companies expect to convert salaried workers to hourly employees or monitor salaried employees’ hours to make sure they do not exceed forty hours a week. Others plan to lift workers’ base pay to the new threshold to avoid paying overtime. Some colleges have said they might have to cut services or raise tuition to keep up with the guidelines.
This rule does not change the requirements already in place for hourly employees. Generally, they are eligible for overtime pay no matter how much they earn per year. The new rule for salaried workers goes into effect December 1, 2016.