One of the few downsides of having a real, big-girl or -boy full-time job that comes with a salary and benefits is that, no matter how many hours the job requires, workers are likely exempt from federal requirements mandating employers pay overtime wages for those who work more than 40 hours per week.
As things stand, labor laws allow employers to forego overtime payments to any workers making more than $23,660 annually. New regulations expected to be announced by the U.S. Department of Labor later today will up that standard to around $47,500. The change, expected to become effective later this year, could make more the 5 million new workers eligible for time-and-a-half pay.
“It doesn’t make sense that this allows salaried workers to be paid less than the minimum wage,” President Obama said when he announced his intention to see the rule changed last June. “Overtime’s a pretty simple idea. If you have to work more, you should get paid more.”
Rob Friedman, a labor-focused lawyer for Dallas' Littler Mendelson, says that the goal for employers will either be to have employees remain exempt under the new standard — employees making just under the $47,500 threshold might be given a raise over the threshold — or to make now non-exempt employees as cost neutral as possible by converting them to hourly employees.
"You'd pay the hourly, but you'd back into it trying to figure out the number of hours you expect them to work and what you would pay them hourly with overtime," he says. "The other thing that could happen is, companies could cut exempt employees and rely on fewer and fewer people to do the same job."
Enforcement for the new requirement would rely on employees who felt the rules were being violated either going to the Department of Labor or filing suit against their employer in federal court. Friedman expects that the new rules will also include new increases in the pay floor for exempt employees every three years.
"What's going to happen is, every three years there's going to be increases. So, whereas now the threshold amount hasn't changed for many years, these rules anticipate every three years that they will go up based on indexing that we think will be tied to inflation," Friedman says.
While the new rule could be good for those near the exempt line, Friedman anticipates the changes will be hard on both businesses and those workers close to the current line.
"This is going to be a net-negative for businesses and I would also say it may be negative for employees. I don't think it's realistic — especially for companies paying closer to the current amount — it's just not very likely that overnight companies are just going to double individual salaries. I expect that there are going to be unintended consequences," he says.