Change to Federal Law Providing Overtime Compensation to Employees

By Peter R. Rosenzweig

A proposed change in federal wage and hour law will soon go into effect.  This change will significantly increase the salary threshold for employee overtime pay eligibility.  It will benefit employees and will adversely affect employers.  Prior to this change, an employee would be “exempt”, and therefore ineligible for overtime pay, if his/her salary was greater than $455 per week (assuming that other eligibility criteria were met as well).  The proposed change to the law more than doubles the salary threshold to $970 per week.

What does this mean for employers?  There will be a considerable increase in the number of employees who may be entitled to overtime pay for hours worked in excess of 40 per week.  Specifically, the proposed change to the law will expand the number of employees who may be eligible for overtime pay because their salary does not exceed the new minimum of $970 per week.  As an example, the employee who was previously paid a salary of $600 per week would have met the $450 salary requirement and could therefore have been exempt (meaning that he/she would not be entitled to any additional pay for hours worked in excess of 40 per week).  With the recent change, however, that same employee will not meet the new $970 salary requirement and will not be exempt, meaning that he/she could be entitled to additional pay for hours worked in excess of 40 per week.  This change has tremendous potential benefits for employees.  Employers, however, aren’t so fortunate.  Depending on the number of employees who are paid a salary below the new threshold, the employer could now be paying far more overtime compensation than it did before.

For more information on how this law could affect you as an employee or your business as an employer, contact Peter Rosenzweig at 267.443.4120 or via email at [email protected].