Possible changes brought about by the Obama administration have been heavily discussed recently. Experts are expecting a significant number of American workers to be eligible for overtime pay if the proposed changes are to take effect. Changes under discussion are: raising the threshold and amending how exempt duties are defined.
The Economic Policy Institute estimates that increasing the threshold to $42,000 would make 3.5 million more workers eligible for overtime pay and that increasing the threshold to $52,000 would mean 6.1 million workers would qualify for overtime pay. Advocates for a threshold increase like EPI and the National Employment Law Project, would very much like to see the threshold raised to a minimum of $51,168 (which would be $984/week). Doing so would provide overtime eligibility to 47% of workers. Compare that to 12% eligibility according to current employment law and 65% eligibility in 1975.
Advocates would also like to see the Department of Labor include more specifics regarding what makes a position exempt from overtime. As it stands, employment law defines eligibility for classification as an exempt administrative employee as having a primary duty requiring that the worker “exercise discretion and independent judgment with respect to matters of significance.” Advocates for employment law change suggest that this is completely meaningless since any job requires SOME independent judgment. Suggested changes include specifying that more than half of a worker’s time needs to be spent performing “exempt duties” to prevent employers from offering “hollow” promotions with managerial titles, little to no pay increases, and even less managerial power.
Employers are concerned because with more generous overtime pay protections, their payroll costs will increase. The end result from the company’s perspective would be paying time and a half (overtime pay) to more eligible workers or they could potentially decide that it’s more cost effective to hire additional workers to cover the additional work hours needed while preventing current employees from getting overtime hours. Representatives of the U.S. Chamber of Commerce argue against advocate suggestions stating that one income threshold for the entire country is too broad and won’t work. They suggest applying geographically specific thresholds instead.
With big changes to the income threshold as is being contemplated, employers would be required to reclassify millions of salaried workers to hourly. That could result in employees losing benefits. Morale could suffer in the workplace as well. For instance, salaried workers have more leeway regarding their hours. Previously exempt, salaried employees who are changed to hourly as a result of the proposed employment law changes may see their pay docked for midday appointments, or could be required to use a vacation day to cover the absences that used to be a slight adjustment to their schedule of salaried work. Such changes could also negatively affect workers who are accustomed to benefit from merit-based bonuses, salary level vacation day packages, etc.
For more information on what the proposed changes might look like in your workplace, check back soon for up to date employment law news updates at Blumenthal, Nordrehaug & Bhowmik.