Changes Looming to Overtime Eligibility

Currently, if you are a salaried employee, earning between $23,660 and $47,476 per year and have some managerial or decision-making authority, you are likely classified as an “exempt” employee, which means that you are not eligible for overtime pay if you work more than 40 hours in week.

However, a new regulation announced today (May 18, 2016) by the White House and the Labor Department may change that before the end of this year. The new regulation, which is set to go into effect on December 1, 2016, would require that most salaried employees earning up to $47,476 per year must now receive time-and-a-half overtime pay when they work more than 40 hours in a week. The previous cutoff for overtime pay, set in 2004, was $23,660.

Employees currently earning annual compensation less than the new threshold will likely experience one of the following changes in their employment: (1) they make more money – if their employers make no changes to base compensation or number of hours worked, many employees will reap the financial benefits of overtime compensation when they work in excess of 40 hours in a week; (2) they may get a raise in base salary – some employers may increase base compensation to an amount that exceeds the new threshold, thereby maintaining the employee’s “exempt” status; (3) they may work fewer hours – the new regulations may cause employers to limit the number of hours affected employees work each week, thereby avoiding the obligation to pay overtime compensation, but this would also result in less overall compensation for workers accustomed to working over 40 hours per week; (4) they may experience no compensation change at all – employers may opt to lower the base salaries of affected employees, such that their overall pay (including base wages and overtime pay) remains roughly unchanged, but employers taking this route can expect unfavorable reactions and increased turnover among affected employees; or (5) they may see a reduction in other employment benefits – employers may seek to offset the increased costs of having to pay overtime compensation by cutting back in other areas.

If you would like more information about overtime compensation or would like more information about the employment and business legal services we offer, please contact Dan Burke at 317.709.4242, or