New Overtime Rule to Affect Millions of Workers
The Department of Labor’s final rule on overtime regulations will influence how an estimated 4.2 million American workers are paid during the first year of implementation, which starts December 1, 2016. President Obama first asked DOL to revisit the regulations in 2014; the department received 270,000 comments on its 2015 notice of proposed rulemaking.
As explained in a DOL video, the final rule raises the minimum salary threshold for overtime protections from $23,660 to $47,476. Employers will choose whether to raise the salaries of currently exempt employees to the new threshold, limit their workweek to 40 hours, or pay them overtime when they work beyond 40 hours. An important note from the FAQ is that “Nothing in the rule requires employers to change employees' pay to hourly from salaried, even if the employees' classification changes from exempt to overtime eligible.” The duties test is not changing.
Other changes in the rule:
- The salary level test will account for nondiscretionary bonuses and incentive payments; these may satisfy up to 10% of the standard salary level test.
- The compensation requirement for highly compensated employees will rise from $100,000 to $134,004.
- The salary and compensation thresholds will change every three years to match trends in wage growth.
Randy Johnson of the U.S. Chamber of Commerce sees the rule as “another regrettable burden being piled on employers” and criticized the lack of cost-benefit analysis. House Speaker Paul Ryan plans to fight the rule, which he argues “hurts the very people it alleges to help,” because he expects small businesses and nonprofits will choose to eliminate positions.