Labor Department Finalizes New Overtime Pay Rule

May 19, 2016  |  Employment Law, Overtime Violations

On May 16, the U.S. Labor Department announced it had finalized new overtime compensation rules. By raising the income threshold at which employees are eligible for paid overtime, the agency estimates that approximately 4.2 million workers will reap substantial benefits.

A Welcome Change

When the new rules go into effect on Dec. 1, 2016 workers paid a salary less than $913 per week ($47,476 annually) will have to be paid overtime (time and a half their hourly wages) whenever they work in excess of 40 hours per workweek. The current outdated threshold salary which has not been adjusted for inflation in over a decade is only $455 per week ($23,660 annually).

Millions of workers are currently “exempt” from overtime compensation because their employers classify them as “exempt executives.” For example, this exemption is sometimes applied to managers and assistant managers at stores. No matter how many hours those “exempt executive” employees work per week, they cannot earn overtime, and instead are typically paid only their salary. For example, an assistant store manager making $35,000 a year could work 70 or 80 hours a week and still only receive his or her base salary. In fact, the amount of work performed by such “exempt executives” under the old and outdated version of the executive exemption could result in them earning less than minimum wage when dividing wages paid by the hours actually worked.

Under the old rules, many employers have been allowed to label assistant store managers who spend most of their time stocking shelves, sweeping floors, and cleaning toilets as “exempt executives.” So, this pay raise will hopefully help close that abusive and absurd loophole.

This new rule, proponents say, will ensure that “middle-class jobs pay middle-class wages,” according to an article that appeared on The Huffington Postwebsite. President Obama ordered the reform under the Fair Labor Standards Act (FLSA) and does not need congressional approval. However, according to the article, Republicans may try and block the move by adding a rider to an appropriations bill. But that would very likely ensure a long, protracted fight from Democrats, one that may ultimately not be worth the effort.

Serious Inequities Remain

Until the rules go into effect, however, there are still millions of workers across America who could be unfairly exploited. Just because they have a title that says “manager,” their employers may feel they can get away with forcing them to work onerous schedules for no extra pay.

If you have been working overtime hours without the proper compensation, Baron & Budd may be able to help. Please call 866-495-1255 or complete our contact form to learn more about your potential legal options.

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