Employers Beware! How Obama’s Overtime Changes Will Affect You

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How Does Overtime Work Now?

Whether you are an employee or employer – Obama’s proposed overtime changes can make a big impact on you.  Before we get into the changes, a quick background on overtime pay is in order.

The Fair Labor Standards Act (“FLSA”) requires employers to pay time and a half to any eligible employee who works more than forty hours in a week.  The FLSA requires all hourly employees to be eligible for overtime pay.  Salaried employees, on the other hand, may or may not be eligible for overtime pay. 

Salaried Employees

Salaried employees are not eligible for overtime if they meet two criteria:  1) the salaried employee makes more than $455 per week, or $23,600 per year; and 2) the salaried employee performs specific duties as outlined by the law.  As you can quickly see, a vast majority of American workers will automatically meet the first criteria because they make more than $23,660 per year.  This means that a great deal of American workers are ineligible for overtime pay.  For this very reason, President Obama has proposed that this threshold be raised significantly.  The Obama Administration’s proposal would more than double the current threshold, making it $50,440. By raising this threshold, an estimated 5 million more Americans will suddenly be eligible for overtime pay when they were previously not. 

The Impact on Workers and Employers

The impact of this law could mean extreme changes in the American workforce.  If you are an employee who has been newly minted as eligible, you suddenly stand to earn overtime pay and can see your wages increase dramatically.  On the other hand, if you are an employer, you may be exposed to an unforeseen and drastic increase in your labor costs.  It is important to follow this proposed change so that you are not left scrambling to adjust at the last minute, or worse, have to pay the price of non-compliance.

Unintentional Errors in Overtime Pay

Employers tend to lean towards labeling an employee exempt from overtime as soon as the salary threshold is met.  However, meeting the salary threshold does not automatically mean the employee is ineligible for overtime.  As stated above, the employee’s duties must also be factored in, and because of this, the overtime determination is many times made on a case-by-case analysis. 

As employment attorneys, we see many cases where employers mistakenly believe they are following the law, and incorrectly label employees exempt when they are not.  These gray areas often times lead to litigation, and these type of disputes will only stand to increase if Obama’s proposed changes are enacted.

Don’t Go It Alone

For employers, unnecessary liability can be avoided by working closely with an employment attorney to properly classify your employees.  For employees, it is just as important to consult with an attorney to make sure your employer has not mistakenly classified you as exempt, thereby costing you valuable overtime pay.

At Wilson McCoy, we represent both management and individual employees.  If you have general questions or concerns about these proposed changes and how they will impact your business, contact our office for a consultation at (407) 803-5400 or [email protected].