So, the Department of Labor just issued new overtime pay rules, meaning more money in your pockets! Maybe. Rules. Funny word. We’ve been hearing that word a lot lately. Though, who issues rules? Some might say, a ruler. You might want to think about that for a bit. That’s my opinion, at least. To each their own. Sadly, most people will likely just see any immediate financial gain as a positive, without seeing the big picture of the systemic problems that can be created for business, which eventually come back around to affect the employee.
In total, the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years.
President Obama wrote this message to petition signers to announce that the Department of Labor will be finalizing a rule that expands overtime pay to millions of American workers.
How might this affect employees?
First off, not everyone will be eligible. If you’re an employee, here’s a few highlights to make sense of all this:
- If eligible, overtime must not be less than 1.5x your regular pay rate1
- Salaries below $47,476 are now non-exempt and eligible
- Minimum salary threshold for exempt employees is $134,004
- Minimum salary rates for exempt and non-exempt thresholds will increase every 3 years
- Types of positions that may be exempt under FLSA: Administrative, Executive, and Professional
- Exceptions still exist for public agency employees, such as fire fighters and police officers, depending on department size and work schedules2
Real Talk on Overtime “Rules”
At face value, for a lot of you, there might seem to be some initial benefits with these new changes. There might be, however, some downsides as well. For example:
• Improve work-life balance. Too many salaried, white collar workers today are overworked, and their employers have no incentive to limit hours because they aren’t required to provide additional pay when employees work more hours. Under this rule, employers will have a renewed monetary incentive to support work-life balance. Many workers will put in fewer hours without seeing a reduction in pay, giving them more time to spend with their families and in their personal pursuits.
The Real Talk version: Government-incentivized reduction of YOUR work hours. Understand that profit fuels business, which provides the capability for employment. When regulation negatively affects business profit, the business must adapt to remain profitable, otherwise it will become incapable of supporting the same level of employment. In short, many employers may end up restricting hours, to protect profit margins. See what I’m getting at, with the potential long-term, systemic effects? Here’s another example:
• Increase employment by spreading work. The better work-life balance for workers who will now be eligible for overtime protection may create new opportunities for other workers. Some employers will hire additional workers—or give more hours to part-time workers—to cover work currently done during overtime hours.
The Real Talk version: Government-incentivized reduction of overtime. Wait, what?! In essence, to protect profit margins, many businesses may decide to “spread the work hours” around a bit more, minimizing the potential for paying increasing overtime. That’s just smart business. So that means, all those overtime hours you may have chosen to work, to pay the bills, get yourself out of debt, or build something better for your future…well your company may decide to limit those potential hours, and give more hours to part time employees.
What does this mean for employers?
First off, my apologies. As if the ever-increasing regulation wasn’t making it tough enough for small business, these new “rules” are likely to cause a bit of a system shock for an ever-increasing number of small business owners. If you’re an employer, here’s a few highlights to make sense of all this:
- Salaried employees below $47,476 are generally non-exempt now, and will need to be tracked and paid hourly
- Salaries below $47,476 are now non-exempt and eligible
- Historically, wage and hour lawsuits have been up nearly 500% since 2000, and will likely continue trending upwards with these new changes
- There is still no requirement for any circumstances requiring 2x pay under FLSA
- There is no requirement under FLSA for extra pay with weekend or night work
- There are no requirements under FLSA for determining when to change an employee’s work hours
The new “rules” go into effect December 1, 2016, so if you think they might concern you, and especially if you’re a small business owner, unfortunately it will probably be necessary to take a hard look at these changes and determine whether you need to implement any changes within your company. Thankfully, there is still room for businesses to maneuver and protect profit margins. As a business, you might consider adjusting work hours and shifts accordingly. Also, you might consider approving additional hours for part time employees, and potentially restricting overtime hours for full time employees.
For employers, here’s a link to the U.S. Department of Labor’s Wage and Hour Division resource site, to better understand how your business might be affected: https://www.dol.gov/whd/foremployers.htm
For job seekers and employees, here’s a link to the U.S. DOL’s resource site for you. Considering your employer might be making changes that could affect you, it’s a good idea to educate yourself and prepare for what to expect: https://www.dol.gov/whd/overtime_pay.htm
 U.S. Department of Labor. c2016. Overtime Pay – Wage and Hour Division. [Accessed 2016 May 18]. Link
 U.S. Department of Labor. c2016. Law Enforcement and Fire Protection Employees Under the Fair Labor Standards Act. [Accessed 2016 May 18]. Link