On Tuesday, the U.S. Department of Labor issued a rule that extends mandatory overtime pay for 1.3 million workers in the U.S.
Currently, workers who earn a salary (not hourly wages) of $23,660 per year or less are entitled to overtime pay for hours worked in excess of 40 a workweek. This number was set back in 2004. The new rule, which is set to go into effect on January 1, 2020, will increase the threshold to $35,568 per year, likely meaning small to mid-size business owners everywhere will have salaried employees who now qualify for overtime pay.
Additional Details About the Labor Department Extending Overtime Pay
Beginning January 1, employers will need to pay workers who are eligible one and one-half times their existing rate of pay whenever they work more than 40 hours in a given week. However, it’s important to remember that even if workers earn above the threshold amount, they are still eligible for overtime pay so long as their primary duties are not management-related.
In a quote from a call with reporters, acting Secretary of Labor, Patrick Pizzella, said the U.S. Labor Department “believes there will be a broad consensus that more overtime pay for America’s workers is a positive step forward.”
Interestingly, in 2016 the U.S. Labor Department had actually doubled the salary threshold to nearly $47,000. At the time, this extended mandatory overtime pay to nearly 4 million workers in the U.S. However, the following year a federal judge in Texas struck down the Obama Administration’s overtime pay rule. The judge reasoned the threshold was high enough to include some management workers, who are supposed to be exempt from overtime pay protections.
Help from a Labor and Employment Attorney
It’s common for class-action lawsuits to arise as a result of unpaid overtime. Moreover, companies frequently pay thousands of dollars in order to settle these cases.
With the salary threshold being increased, even more lawsuits are likely. Because more workers will now be covered by this federal law requiring their employers to pay for overtime, employers must reassess their employee structure and classification in order to minimize future risks. Consequently, this may also lead to employers cutting worker hours, or perhaps even eliminating positions, to avoid paying mandatory overtime.
If you are an employer with questions regarding this new regulation or any issues related to employee wages and classification, we encourage you to contact us. We are well versed in labor and employment issues and can help protect you and your business.