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Expanding Overtime Pay to Millions

Posted on behalf of Peter T. Nicholl in Employment Sep 16, 2016

In today’s modern workforce, employees have increasingly been working longer hours for less pay. Many of these workers are salaried employees, who are told by their employer that they do not qualify for overtime. Recently, under the Obama administration’s direction, the Department of Labor (DOL) passed new regulations that affect who is eligible for overtime payments. The DOL estimates that this will now enable approximately 4.2 million Americans to receive overtime payments, who were previously considered exempt. So who are these people and what do they do?

Who gets paid overtime: The White Collar Exemptions

The White Collar exemptions are the main types of job classifications that typically “exempt” workers from being owed overtime. The three main exemptions are the:

• Executive Exemption: Employees whose primary job duties involve “management” and who regularly direct the work of at least 2 or more employees. They must have the authority to hire or fire employees, or at least be able to give recommendations about hiring and firing. Common “Executive Exempt” job titles are:
  • Manager, Assistant Manager, Shift Supervisor, Superintendent, Jobsite Foreman.
• Administrative Exemption: Employees who primarily perform office or “non-manual” work directly related to the management or general business operations of the company. These types of employees exercise discretion and independent judgment in their work. Common examples include:
  • Human Resources, Purchasing or Procurement Officers, Public Relations, Advertising and Marketing, Compliance workers.
• Professional Exemption: Employees whose primary job duty requires “advanced knowledge” that also requires the exercise of discretion and judgment. These are the types of employees who have graduate or other advanced degrees. Examples include:
  • Doctors, Accountants, Lawyers, Doctoral Candidates, Engineers.

In the past, these types of employees almost never received overtime pay because they performed these job duties and met a set “salary threshold”. This threshold is precisely what the Obama Administration sought to change.

Salary Test: The Old and New Rules

In order to qualify for any of the White Collar Exemptions, employees must meet the Salary Basis Test. Under the current or old rules, the salary threshold was $455 per week, which is roughly $23,660 per year.

So, currently, as long as an employee is paid $455 per week, they can qualify for one the above exemptions.

However, under the Obama Administration’s instructions, the Department of Labor recently passed new regulations that raise the salary threshold. Effective December 1st, 2016, the new threshold is $913 per week, or roughly $47,476.00 per year.

Under these new rules, any employee who is paid a salary below $47,476.00 will now be eligible for overtime payments. This includes all employees who are paid a salary, regardless if they perform job duties listed in the above exemptions.

Industry Standard: The new rules will hit certain industries harder than others

While the new rules will apply to workers in all sorts of fields, certain industries will be impacted more significantly than others. If you work in one of the following industries, pay extra attention to these changes:

• Retail & Restaurant Establishments: Many retail and restaurant establishments pay their managers and assistant managers salaries significantly less than $47,000.00. They will now have to pay overtime.
• Healthcare: Millions of healthcare workers who perform administrative duties are paid on a salary basis below $47,000.00. They will now have to be paid overtime.
• Higher Education: Many administrators, research assistants, post-doctoral candidates, admissions officers and other Higher Ed employees are paid below the $47,000.00 salary threshold. They will now have to be paid overtime.

What to Expect: Employers will change their tactics:

In order to adjust to the rules, many employers will soon begin to change the way they pay their employees. If you are a salaried employee making below $47,000.00, there is a good chance that your employer will switch you to an hourly employee. If that happens, here are some things to keep in mind:

• Off-the-Clock Work: As a salaried employee, it is common to perform work duties outside of the office, like answering emails and telephone calls. If you are switched to hourly, you must be compensated for this time. While many employers are prepared to switch the way they pay their employees, they are likely not ready to deal with the repercussions, such as paying their employees for all hours worked.
• You may be owed back wages: If you are a salaried employee who is now being switched to hourly, there is a good chance that you were misclassified as salaried previously. If this happens, it’s a good idea to review your job duties for the past few years. If those job duties don’t seem to fall into one of the exemptions listed above, it is likely that you are owed back wages.

With these new rules going into effect December 1, 2016, many employers are still trying to figure out what, if any, changes they are going to make. Rather than waiting and seeing what happens, it is extremely important to be informed of these new rules so you know what you’re owed. If you think that you might soon be eligible for overtime, or that maybe you should have been paid overtime in the past, it is critical that you seek help in understanding and claiming your rights.