The Department of Labor has initiated a new policy endorsed by President Barack Obama that would increase the Fair Labor Standards Act of 1938 (FLSA) overtime threshold to $50,440 per year. 5 million Americans are expected to be affected by this new rule during the first year of implementation. Read on to learn more about the proposed overtime rule change and how it may impact your business.
Fair Labor Standards Act of 1938 Overview
Under the current law, covered workers under the FLSA are required to be paid at least time-and-a-half for each hour they work beyond 40 hours a week. The salary threshold in which workers are eligible to receive time-and-a-half pay is $23,660 per year. No matter what an employee’s title maybe (example – store manager, supervisor, or assistant director) they cannot receive overtime so long as their yearly salary is above this threshold. Since the threshold was set in 1938, it has never been raised to meet inflation. Most employers provide their employees with time-and-a-half pay above the $23,660 threshold. However, employers in the fast food and retail industry do not. Most retail and fast food managers average salary is slightly above the set threshold.
How the New Overtime Rule Will Impact Your Business
Most businesses have not welcomed the proposed new rule. Business owners are considering hiring more part timers to do the work of first line managers while cutting base pay and benefits to maintain the same compensation levels. Employers should consider the provisions the Affordable Healthcare Act may have in insuring staff as they add more part-time employees under the proposed rule. Most employers feel that the proposed new rule will costs them hundreds of millions of dollars upon implementation.
National Reception of the Proposed Rule
Proponents of the rule believe that business owners who are already paying their workers a fair salary will not be impacted by this new rule.
“It’s good for business owners who are already paying their employees what they deserve — since [they cannot be] undercut by competitors who aren’t.”
Workers in sectors of retail, food service, accounting, and oil and gas will benefit from the passage of the new rule. It is expected that women, minorities, and younger people will be greatly affected by the new overtime rule.
Opponents of the rule can use the legal system to try and delay its implementation or completely block the rule from being enacted by amending the FLSA.
If the rule is enacted, you will need to notify employees of their new overtime rights. Contact me for more information about how to go about complying with the new overtime rule in your workplace.
Sources
How to make sense of Obama’s big changes to overtime policy
Experts weigh in on how Obama’s overtime rule change could benefit millions of workers and employers
President Obama overtime rule could raise wages for 5 million