A new federal overtime law signed into law by the president could potentially give millions of Americans a pay increase by raising the salary threshold for overtime exempt employees . The new overtime exemption law takes effect December 1st, 2016, and because of the law most hourly workers making less than $47,476 annually could be eligible for overtime pay under the Fair Labor Standards Act.
The last wage exemption threshold was raised in 2004 to $23,660. The president justified the increase due to years of economic factors like inflation taking its toll on American workers. The overtime exempt wage threshold could be updated every three years from now on based on certain economic factors to keep pace with changing conditions. Reports suggest less than 10 percent of the U.S. labor force qualifies for overtime based on job classification and salaries.
Over 4 million U.S. workers are expected to be affected by the change. Of that 4 million, almost half are restaurant and retail employees. Of those estimated 2 million, approximately 100,000 may get a $1,500 pay increase from their employer to put them over the overtime exemption threshold.
Conversely, one-third of salaried workers may now become eligible for overtime. The new overtime exemption laws may not be without their drawbacks, and employees should understand the implications, both positive and negative, of the change.
The new overtime salary law could result in employees barely under the salary limit receiving a pay increase as a means of putting them over the threshold to disqualify them from getting overtime pay. Additionally, some currently salaried employees may only be asked to work a 40 hours work week but make the same amount of money; this would deny the chance to earn overtime pay, but would also allow more free time.
Disadvantages of the 2016 overtime pay change may include salaried workers being forced to take pay cuts and reclassified as hourly non-exempt employees and face reduced work hours to protect against overtime wage payments. Experts surmise employers may lay off salaried employees altogether and hire other low-wage workers as replacements.
If you are a salaried or hourly worker between the new and old threshold and have questions about how the law may affect you or if you believe your salary was not properly adjusted to conform to the new law, contact the Chicago employment lawyers of Goldman & Ehrlich. We are eager to assist you today.