Anyone making less than $47,476 is now eligible to receive overtime pay, or time-and-a-half pay, thanks to a new overtime exemption rule that’s been finalized this week by the U.S. Labor Department. The controversial measure doubles the previous overtime threshold of $23,660 with the goal of providing a monetary boost to Americans with slow-growing incomes.
Nearly 4.2 million salaried workers have become eligible for overtime pay when they work beyond 40 hours a week. The new rule is also believed to help millions of American workers who are technically eligible for overtime, but not receiving it.
“Our whole mission here is about strengthening and growing the middle class,” Labor Secretary Tom Perez told NPR about raising the minimum salary threshold. “In order to do that, we need to ensure that middle class jobs pay middle class wages.”
Since 1938, the Wage and Hour Division of the Fair Labor Standards Act (FLSA) has protected working class citizens from exploitation by their employer by ensuring time-and-a-half for overtime pay in certain jobs sectors. While more than 60 percent of salaried workers were eligible for overtime as recently as 1975, inflation and regulatory changes dropped that number to a feeble 7 percent.
Thanks to the new changes, millions of managers earning as little as $24,000 at retail stores and fast food restaurants will no longer be overtime exempt, and will now be entitled to receive overtime pay when their employer requires them to work 60 to 70 hours a week to keep their position.
“The angst that people feel across this country is so frequently the product of the fact that they’re working hard and falling further behind,” Perez told NPR. “They feel like they lost leverage. And the reason they feel that is because in the case of the Fair Labor Standards Act, they indeed lost a lot of leverage.”
Roman Shaul, a Principal in Beasley Allen Law Firm’s Consumer Fraud section, supports the latest FLSA overtime changes. He says the past salary threshold for overtime pay was outdated and unreasonable.
“The FLSA was a Depression Era law designed to treat overtime as a penalty,” Shaul explains. “The hope was that employers would hire more workers to avoid paying time and one-half. The new regulations are consistent with the original legislative intent. The new regulations will not catch the larger employers by surprise; however, they may come as a shock to many smaller businesses.”
The new rule updating the overtime regulations is expected to extend overtime pay protections to 4 million American workers within the first year of implementation. It was signed by President Obama on May 18, 2016. The effective date of the final rule is Dec. 1, 2016.