Be Prepared! New Overtime Pay Rule Coming Soon
In a move that many view as long overdue, the Labor Department has recently proposed a major expansion of overtime pay eligibility. If enacted this new regulation will entitle millions of workers to overtime pay who had been denied this important benefit in the past.
The vast majority of workers in this country are, of course, entitled by law to a minimum wage for all hours worked. Most workers are also entitled under federal law to receive overtime compensation of time and a half for all hours over 40 in a work week. Certain types of salaried workers, however, are exempt from this overtime premium pay. Often employers have abused these exemptions by putting employees on a minimal salary and taking away their overtime pay, even though the employees were not in executive or administrative positions.
Under the Labor Department’s new rule, such abuse will become more difficult. This is because the ceiling for automatically receiving overtime pay will jump from $35,500 to $55,000 per year, a 55% increase. This means that workers making anything less than $55,000 per year must receive overtime premium pay regardless of their title, work duties, or how their employer chooses to classify them.
This overtime threshold has historically been revisited every several years. The last time the threshold was changed was in 2019, from $23,700 to the present $35,500, a 50% jump, under the Trump administration. The Obama administration had previously increased the ceiling amount by over 100%, to $47,500. In 2018, however, a federal judge suspended the rule, holding that the Labor Department did not have the legal authority to raise the overtime cutoff so substantially.
The Labor Department estimates that the rule change would affect nearly 4 million salaried workers and would result in a transfer of over a billion dollars from employers to employees in its first year. In a published statement, Julie Su, the Department’s acting secretary described the purpose of the rule change as helping “restore workers’ economic security by giving millions more salaried workers the right to overtime protections.”
Assistant managers of restaurants and retail stores is one group of workers that is likely to be particularly impacted. These workers are often not paid overtime premium pay even though they do little managerial work, have no hiring or firing authority, and enjoy little independent decision-making authority.
Although the law requires that such “managers” receive overtime pay, such violations of the law often go unchallenged. Employees may keep quiet out of fear of employer retaliation. Or they may simply not know that the law offers them protection and that there are lawyers, like those at the Crone Law Firm, that can help them without any upfront cost.
The new rule would substantially reduce the subjectivity and ambiguity in determining which workers should receive overtime pay. In many cases, the new rule would force employers to increase salaries substantially or shift to paying their lower salaried workers on an hourly basis, with overtime pay.
Under the proposed rule, the overtime limit will automatically adjust every three years to keep pace with rising earnings. A 60-day public comment period began on August 30, . At the end of the comment period, the Department will issue a final version of the rule. Stay tuned . . .
In the meantime, if you (or someone you know) is working long hours with little or no managerial authority but receiving a modest salary and no overtime pay, it is worth exploring whether you may be the victim of employer misclassification. Call for a free professional evaluation with an attorney specializing in employment law. The Crone Law Firm, 901 737-7740.