U.S. Department of Labor Proposed Rule Could Expand Overtime Law to Nearly 5 Million Americans, May Be Costly to Employers
Jul 9, 2015
A proposed Rule announced by the U.S. Department of Labor on July 6, 2015 could vastly expand the number of employees that fall within the ambit of the Fair Labor Standards Act’s overtime pay requirements.
Under the existing Rule, which was last amended in 2004, workers who make $23,660 annually–and meet certain other requirements based on their job duties–are exempt from overtime pay requirements. The proposed Rule would more than double this threshold, making overtime pay available for all workers who make less than $50,440 annually.
The White House reported that the new Rule would expand overtime pay to nearly five million more Americans.
Media reports that business owners are concerned about the practical effect of the proposed change and that small businesses may be hit the hardest. According to the Wall Street Journal, a U.S. Chamber of Commerce senior vice president stated that the proposed changes ” . . . will not guarantee more income, but instead will negatively impact small businesses and drastically limit employment opportunities . . .”
Similarly, Bloomberg Business reported that the National Retail Federation believes this change would cause many companies to use more part-time and entry-level employees, offer fewer raises and promotions, and begin paying many salaried employees hourly wages.
The proposed Rule is subject to a 60-day public comment period. The draft Rule would then take several months to finalize and would not likely go into effect until 2016.
Nevertheless, employers should proactively review their employee compensation structure and consider how this development may affect their business.