In May 2016, the U.S. Department of Labor (DOL) announced new rules that dramatically increase the number of workers eligible for overtime pay. The rules increase the wage threshold from $455 per week (or $23,660 for a full-year worker) to $913 per week (or $47,476 for a full-year worker. The new overtime rules go into effect on December 1, 2016.
Predictably, the new overtime eligibility rules have drawn criticism from many employers, industry associations and politicians. To counter some of the myths that have arisen about the new overtime rules, Carlin & Buchsbaum, LLP presents the following information:
Myth: The rules impose new administrative burdens on employers, making it more expensive to interpret and comply with wage and hour laws.
Actually, DOL's rules provide greater clarity to employers. Because the wage threshold will be adjusted every three years, employers will be able to plan accordingly.
Myth: The rules reduce flexibility in workplace schedules.
The reality is that employers retain the ability to provide flexible work schedules, telecommuting and work-from-home arrangements. Time clocks are not required, nor do workers have to keep manual hourly or daily time sheets.
Myth: Employees will be hurt by the new overtime rules.
The truth is that more than 4.2 million workers nationwide (including more than 500,000 in California) are now eligible for additional pay for the hours they are already putting in at work. Some employers may choose to keep eligible employees hours at 40 hours per week or less. Those employees will gain more family and leisure time. Some employers may choose to increase salaries beyond the threshold to avoid paying overtime. Under all three scenarios, employees benefit.
Myth: This will discourage employers from providing commissions, bonuses and incentive pay.
The new rules allow employers to use non-wage pay in the form of commissions, bonuses and incentive pay to satisfy up to 10 percent of the salary requirement.
Eligible employees who are unfairly denied the overtime pay they are owed under the new rules retain the right to seek compensation through litigation.