Big Changes Coming to Overtime Pay Laws, Including Doubled Salary Threshold

Back in 1938, the Fair Labor Standards Act set the guidelines for overtime pay for hourly and salaried workers. Since then, inflation and the cost of living have both increased significantly, but salaried overtime earnings has not. In order to bring overtime laws up to modern speeds, President Obama has recently signed a bill into law that will make large changes to the legislation.

Come December 1st, 2016, the salary threshold will be raised from $23,660 a year to $47,476, or from $455 a week to $913 a week. This means that anyone who earns salary pay for less than $47,476 and works more than 40 hours a week will have to be paid overtime – time-and-a-half – for any time put in beyond the first 40. The change is expected to affect more than 4 million Americans who are currently working more than 40 hours each week but are not earning any overtime pay.

According to the administration’s estimates, young employees with Bachelor’s degrees should be the most widely affected group. Throughout the course of the next 10 years, the change should bring about $12 billion in additional earnings for salaried employees. The law also mandates that the threshold be reexamined every 3 years and adjusted accordingly, attempting to prevent any stagnant legislation from occurring in the future.

Employer Concerns Addressed

The “highly compensated employee” (HCE) threshold has also risen, from $100,000 to $134,004. The HCE threshold allows an employer to file an employee as exempt from overtime with relative ease as long as they make more than that threshold. The duties test, which is used to determine if an employee’s job duties should qualify them for overtime pay, will remain unchanged. Additionally, employers can count bonuses and sales commissions towards 10% of the threshold.

At such an early stage, it is unclear how these legislative changes will affect employees and employers. For more information about the implemented changes, the United States Department of Labor has posted an article here. If you need help understanding employment law and how it might pertain to a potential lawsuit, contact our Oklahoma City employment lawyers from Mazaheri Law Firm today at 405-414-2222.