A Department of Labor rule due to go into effect Dec. 1 was overturned by a federal court judge in Texas. The judge issued an injunction against the ruling which would have doubled the salaries allowed to be eligible for overtime pay.
The threshold for employees who would qualify for overtime if they work more than 40 hours a week could double if a new rule proposed by the Department of Labor goes into effect. A significant change to current regulations, the proposal raises the minimum threshold salary for overtime pay from $23,660 per year to $50,440 per year for full-time salaried employees. Currently, those making more than $23,660 are exempt from federal overtime pay and record-keeping requirements. Additionally, the new rule proposes automatic annual increases to this threshold.
Called white-collar exemptions, overtime rules affect only those employees classified as bona fide executive, administrative, professional or outside sales employees along with some computer employees.
According to estimates, more than 5 million employees would now be eligible for overtime pay — a change that stands to have a significant impact on an employer’s bottom line. Because of the potential to significantly raise the costs of a company’s labor and wages, most small businesses are opposed to the proposed rules.
Those opposed to raising the overtime threshold argue that most businesses will not be able to afford the increases. They also argue it will harm the very people it seeks to protect because employers would be compelled to reduce work hours or limit salaried positions.
Proponents of the change argue that the law is needed to protect workers and bring salary thresholds up to current economic realities.
Proposed changes could be promulgated later this year. They would become effective 60 days after promulgation, most likely in early 2017.
If the new rules become law, the only two ways to avoid the overtime rule is to pay salaried employees more than $50,440 or to change the status of salaried employees earning less than that into hourly, on-the-clock employees. Either way, it means changes in employment practices and increased expenses.
Andrew Greenwell is a lawyer with a civil trial and appellate practice with a focus on commercial litigation. He was listed as a Super Lawyer in 2011-12 and 2014-15 and a Best Lawyer since 2005.
