How the President’s Overtime Proposal Could Impact You

Photo (cc) by Marcin Wichary

More than 5 million American workers could become newly eligible for overtime pay by 2016 if President Obama’s proposal to update federal OT rules moves forward.

Currently, only workers who earn less than $23,660 a year ($455 a week) are automatically guaranteed time-and-a-half pay if they clock more than 40 hours in a week. The president’s proposed rule would more than double the OT salary cap to $50,440 ($970 per week), NPR reports. The cap would also be indexed to inflation or wage growth, so it would shift with the changing economy.

Introducing the initiative on The Huffington Post, President Obama said “a hard day’s work deserves a fair day’s pay.”

“Right now, too many Americans are working long days for less pay than they deserve,” he said. “That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white-collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work.”

According to CNN Money, there are four ways the new OT rule could impact workers whose pay falls below the proposed $50,440 threshold.

  • Finally, some OT pay: Workers who make around $23,660 and have some managerial duties are classified as exempt from receiving overtime pay. The new rules would allow those low-paid “managers” to be reclassified as nonexempt, so they would receive time-and-a-half if they work more than 40 hours in a week, CNN Money explained.
  • Maybe a (small) raise: “If you earn just under the new threshold, an employer may decide to just raise your base pay by a few thousand dollars to avoid having to pay you overtime,” CNN Money said.
  • Reduced hours: If you’re an employee who regularly works more than 40 hours in a week but haven’t received OT because you make more than $23,660 (but less than $50,440), then you might soon enjoy a reduction in those extra working hours (above 40), unless your boss is willing to pay you overtime.
  • Your hours and pay might stay the same: “Even if you become eligible for overtime, you may still end up working long hours but not get paid a dime more, because your employer could lower your base hourly pay to offset any overtime you’ll be owed,” CNN Money explained.

The proposal, which could go into effect in 2016, must undergo a public comment period. It’s likely to face opposition from both the retail and restaurant industries, NPR said. The OT rule does not require a stamp of approval from Congress.

This rule would have benefited me, and a number of my co-workers, if I had continued working for my last employer. All our positions were salaried, and we earned far less than the president’s proposed $50,440 cap. We also routinely worked more than 40 hours per week.

What do you think of raising the salary cap for overtime pay? Share your comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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