Currently, federal law mandates that if you have an annual salary of $23,660 ($455 per week) or less, you are entitled to payment 1.5 times your normal wage for any time worked over 40 hours during a workweek. However, the Obama Administration is changing overtime law to provide overtime eligibility to 12.5 million employees who do not currently qualify according to an estimate by the Economic Policy Institute. The new rule will establish an overtime threshold of annual salaries at $47,476 ($913 per week). This means that if you earn a salary of less than $47,476 a year, you will qualify for overtime when the new rule goes into effect on December 1st. The overtime threshold has not been updated since 2006 under the Bush Administration.
An employee’s salary is a factor as to whether or not the employee can earn overtime. Currently, however, there is a process known as a “duties test” which is used to determine if an employee can receive overtime based on the actions required by the position. This means that if an employee does the same duties as any other employee who receives overtime, but has a salary that exceeds $23,660, he should still be paid for overtime based on the nature of his duties.
To be exempt from overtime, an employee must be classified as an executive, administrative, or professional employee.
- Executive employees: Executive employees are high level workers responsible for managing the overall operations of a business. To fit the legal standard of an executive employee, the employee must customarily and regularly direct the work of at least two full time workers. Also, an executive employee must concern “significant” management rather than supervising the day to day business or other production activities.
- Administrative employees: Administrative employees are high level employees who work in an office environment or do not perform manual work and are concerned with implementing and administrating management policies.
- Professional employees: Professional employees have advanced knowledge in their specified field of work or learning that requires extensive academic instruction and a college degree. This could include doctors, lawyers, engineers, etc.
It is important to note that to be exempt from overtime pay, an employee must also be able to exercise independent and discretion when making decisions at work. That is to say that the employee’s decisions are not closely monitored or controlled by their employer, and that the employee’s actions are not rigidly adhering to rules previously set by the employer as this would not be considered making independent judgement.
Unfortunately, in some cases an employer will manipulate a classification of an employee to avoid having to pay the employee overtime. An example of this might be giving the employee a title and description that is arbitrary and inaccurate. For example, if you are a retail manager making $25,000 a year and you work 50 hours a week, your employer might say that you are not eligible to get paid time and a half for your additional 10 hours of work. The employer’s excuse is that your duties are deemed as “administrative” or “executive”, even though you still do the same work as other non-management workers and directing and managing the work of others is not your prioritized duty. If this is the case, you should consult with an employment law attorney and refer to the US Department of Labor Fact Sheet #17A to find out if you can receive compensation.
What this Change in Law Could Mean for Workers
Employers now must make a choice to limit the number of hours to 40 a week, or pay the higher overtime to continue to have their workers put in more hours. “Either way, the worker wins.” says Vice President Joe Biden. As an employee, this may provide you with more leisure time or allow you to earn more per week, unless you currently qualify for overtime.
There is concern from industry leaders that the new law will be a “Career Killer” on the idea that the new overtime law will cause many businesses to demote their employees to hourly workers. Employee rights organizations, argue, however that while the law may increase regulation of hours within the workplace, it is a small price to pay for the benefits of overtime qualification. In some cases it might result in a pay increase for employees who are on the border of the overtime pay threshold as employers may give some employees a small raise to avoid having to pay overtime.
Minimum wage and overtime laws have been developing since the Fair Labor Standards Act of 1938. Fortunately, the new development of overtime law should provide additional protection for workers from being overworked and underpaid.
