Ross Kornowske
June 9, 2016
Business Law

Update 11/23/2016:

As of Tuesday, November 22, 2016 a federal court has blocked the implementation of the below law that would have made millions of workers eligible for overtime pay. Click here for more information from NBC News.

 Overtime-Pay

Details About Change

On May 10, 2016, the Obama Administration passed sweeping changes to the federal overtime laws. Under the new law more than 4 million U.S. workers will now become eligible for overtime pay.

Beginning December 1, 2016, the annual salary threshold beyond which companies may deny overtime pay to employees will double from $23,660.00 to $47,476.00.

In many ways the former overtime laws were outdated and the new overtime law was enacted to reflect the realities of the current workplace landscape.

In 1975, 62% of full-time workers qualified for overtime, but this number gradually decreased overtime to the current 7% in 2016. This increase in threshold is expected to make 4.2 million (35%) full-time workers eligible for time-and-a-half wages for each hour they put in over 40 hours per week.

The plan is expected to increase wages by 1.2 billion dollars annually for a total of 12 billion dollars over the next decade. This salary threshold will automatically be updated every three years with projections suggesting it will be over $51,000 in 2020.

Three Options To Deal With New Overtime Pay Rules

Employers have three options for dealing with the change:

  1. Pay their newly eligible employees more than $47,476 a year;
  2. Pay their newly eligible employees overtime; or
  3. Stop working their newly eligible employees more than 40 hours per week and hire more part-time employees.

The new overtime law could also spark a movement away from employer/employee relationships toward an increase in independent contractor relationships. If you have questions regarding how the new overtime laws may affect your business, or how your business can best handle implementation of the new law, contact one of our employment attorneys at Gerbers Law today 920-499-5700 or visit our homepage to send us a message.

 

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