According to Vice President Joe Biden, “In 1975, 62 percent of workers automatically qualified for overtime. Today, that’s 7 percent.”
Under a new labor rule that will come into effect on December 1, 2016, MILLIONS more Americans will become eligible to earn overtime pay. The new rule is expected to extend overtime protections to over 4 million more Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years.
Who Qualified for Overtime Pay Before the New Rule?
Previously, those who earned more than $23,660 were not eligible for any overtime pay.
And, “highly compensated employees,” usually white collar workers, who earned more than $100,000 were not eligible for any overtime pay regardless of their job duties.
Both of these earning thresholds will be significantly increased under the new rule so that more employees may become eligible to earn overtime pay.
Who Will Qualify for Overtime Pay Under the New Rule?
Those who earn salaries of less than $47,476 a year will automatically qualify for overtime pay of time-and-a-half if they work more than 40 hours a week.
What If You Earn Over $47,476 A Year?
Under the new rule, employees who earn between $47,476 to $134,004 might still qualify for overtime pay. Highly compensated employees whose duties require independent discretion, such as hiring, firing, managing and supervising, would not qualify for overtime. In California those must be the majority of a person’s duties in order for the employee to be ineligible for overtime pay. But employees whose duties do not involve such independent discretion might be able to earn overtime pay.
The regulations are not yet clear about how much of these “executive, administrative and professional” duties somebody has to do in order to be exempt from overtime. The Department of Labor suggests a series of tests to determine if a highly compensated employee is exempt from overtime pay.
Certain categories of workers are always ineligible for overtime pay regardless of their salaries. A list of these exempt workers includes commissioned sales employees, farmworkers, airline employees, taxi drivers, etc.
Image Source: dol.gov
What Will Employers Do in Response to the New Overtime Rule?
Some employers might choose to have some employees work no more 40 hours to avoid paying overtime. Limited some employees’ work hours may create more jobs, including part-time roles, as employers decide to hire additional workers to avoid paying overtime. Other employers may increase the salaries of workers so they will be exempt from overtime pay, which could lead to an increase in the pay of other workers. Workers may also be instructed to limit their time responding to work emails and calls after hours.
Here’s a video from the U.S. Department of Labor explaining the new rule:
Video Link: https://youtu.be/UFJaDm720FU
What do you think? Will an increase in overtime pay eligibility lead employers to cut hours and use robots? Or is this new rule a much-needed lifeline for an ever declining American middle class?
