The White House has officially finalized a rule that guarantees overtime pay for middle class workers. This will effect 4.2 million workers across the country.
The Final Rule Will:
- Raise the salary threshold indicating eligibility from $455/week to $913 ($47,476 per year), ensuring protections to 4.2 million workers.
- Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability.
- Strengthen overtime protections for salaried workers already entitled to overtime.
- Provide greater clarity for workers and employers.
The final rule will become effective on December 1, 2016, giving employers more than six months to prepare. The final rule does not make any changes to the duties test for executive, administrative and professional employees.
The rules are the result of a 2014 directive from Obama, who called on the labor department to review the 1938 Fair Labor Standards Act. Under the old ruling, salaried employees were only eligible for overtime pay if they made up to $23,600.
Does this mean all 4.2 million newly eligible workers will now start earning overtime pay if they work more than 40 hrs/week?
Employers are various ways to comply. They can raise salaries to the new threshold to avoid shelling out overtime or they can simply start paying overtime. They can also bring on more part time workers to ensure their current staff will not need to work overtime.
Is this good for workers?
For the most part, workers will see a bigger paycheck under the new ruling. The intent of this rule was to increase money being paid out. Businesses on the other hand believe this may not be the best thing for workers as many salaried employees might be put back on hourly pay and lose some of their benefits while keeping their actual paid income the same. The biggest critics of the new ruling are the retail and hospitality businesses.