What at least some are considering a win for workers across the country, the Dept. of Labor has finalized a rule to update overtime protections. In total, the new rule is expected to extend overtime to 4.2 million Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years. This includes more than 425,000 employees in North Carolina.
The 40-hour workweek has been a pillar of economic security for working families. The rules of the road were simple: if you were called on to put in extra work, your employer had to pay you extra regardless of whether you received an hourly wage or a salary. This left most Americans with more money in their pockets, more time to balance obligations at home and at work, and the opportunity to get ahead with more time outside of work for school or additional training.
Yet over the past 40 years, the share of full-time workers qualifying for overtime based on their salaries has plummeted from 62 percent in 1975 to 7 percent today.
The final rule, which takes effect on Dec. 1, 2016, doubles the salary threshold – from $23,660 to $47,476 per year, or $913 per week – under which most salaried workers are guaranteed overtime (hourly workers are generally guaranteed overtime pay regardless of their earnings level). Additionally, this new level will be automatically updated every three years to ensure that workers continue to earn the pay they deserve.
Overtime protections were first put into place by the Fair Labor Standards Act of 1938, and established the general standard that workers be paid time-and-a-half for any hours worked over 40 hours in a week. In general, all hourly employees are guaranteed overtime, and salaried employees are presumed to have the same guarantee unless they both: (1) make more than a salary threshold set by the Dept. of Labor, and (2) pass a test demonstrating that they primarily perform executive, administrative or professional duties. A limited number of occupations are not eligible for overtime pay (including teachers, doctors and lawyers) or are subject to special provisions.
“At just $455 per week or $23,660 per year, it was easy for employers to avoid paying overtime by classifying employees as managers and having them do the same work as hourly employees plus a few more managerial tasks,” Clermont Ripley, an attorney with the Workers’ Rights Project at the NC Justice Center, said in a press release. “I have had clients who were classified as managers and paid a salary who were required to work 12 or 13 hour days doing a lot of the same work as the hourly employees they were supervising but for a lower hourly rate – often less than minimum wage. “
It’s a ruling that has come under fire by small business owners and their proponents, including the Carteret County Chamber of Commerce, which has taken a public stance opposing the new limits. On May 10, 2015, the chamber board unanimously approved a resolution to this effect with all 21 members of the board voting.
In addition, bills are in committees in both the House and the Senate. Sen. Thom Tillis of North Carolina is co-sponsor of the S. 2707 and Rep. Walter Jones is co-sponsoring HR 4773 – the Protecting Workplace Advancement and Opportunity Act – which is attempting to block the change, although both would require presidential action.
“Most employers aren’t sitting around on a pile of cash just waiting to be told by the federal government to hand it over to their employees,” Tillis commented. “Mandates for higher pay will require these already struggling small businesses to lay off or reduce the hours for workers they can no longer afford.”
Chamber President Tom Kies notes that it is important that employers begin to take heed of the pending change and make preparations.
“I think we should be planning ahead,” Kies said. “We’re going to start tracking our staff’s hours here at the chamber in September so we can be ahead of the game. People need to be prepared and begin looking at how this will affect their company.”
In addition to tracking all employees time, employers must decide if it is more cost effective to raise salaries above the newly-appointed threshold, or to pay overtime to those employees who may occasionally work more than 40 hours a week.
The Dept. of Labor will release technical instructions to help private employers, nonprofit employers and institutions of higher education come into compliance with the new rule.