The Labor Department on Wednesday finalized a new rule that's expected to make an additional 4.2 million salaried workers eligible for overtime pay.
The rule, intended to boost low and middle-income wages that largely have stagnated, takes effect December 1.
Economics reporter Paul Davidson's provides answers to some common questions.
Q. What does the new overtime rule do?
A. Effective Dec. 1, it raises the salary threshold at which white-collar workers are exempt from overtime pay from $23,660 to $47,476.
Q. So who will become eligible for overtime?
A. The Labor Department estimates an additional 4.2 million executive, administrative and professional workers who earn above the old threshold but below the new one will be entitled to time-and-a-half wages for each hour they work beyond 40 a week.
Q. If I get paid a salary rather than an hourly wage, does that mean I won’t be eligible for overtime if I earn more than $47,476?
A. No, not necessarily. Workers have to perform very specific duties to meet the overtime exemption. For example, performing “executive” duties means supervising the work of two or more employees and “administrative” duties requires the exercise of discretion and independent judgment, among other criteria. This Labor Department fact sheet explains the job requirements to meet the overtime exemption.
Q. What if I’m a blue-collar or hourly worker?
A. For the most part, such workers are already entitled to overtime regardless of their earnings level and will continue to be.
Q. Does the new rule mean that all 4.2 million newly eligible workers will now start earning overtime pay if they work more than 40 hours a week?
A. Not necessarily. Employers have various ways to comply. They can simply start paying overtime. But they can also raise an employee’s salary to the new threshold to avoid shelling out overtime. They can instruct affected employees not to work more than 40 hours a week and bring on part-time workers to pick up the slack. And some are expected to cut the base pay of affected employees to offset the new overtime payments, effectively keeping their weekly paychecks unchanged. That’s legal but it would undermine the intent of the new rule, which is to put more money in workers’ pockets.
Q. Will salaried workers who become newly eligible for overtime have to be converted to hourly employees?
A. Many employers are expected to do that so their workers’ hours can be tracked more easily. But they can choose to keep the workers on a salary, though they still must track their hours and pay them overtime if they put in more than 40 hours a week
Q. Is the rule a good thing for workers?
A. For the most part, it should be. It should mean that workers will see bigger paychecks if they put in more than 40 hours weekly or a raise to the new salary threshold, assuming their employer wants to avoid the overtime requirements. But many businesses say there will be negative unintended consequences. Many salaried workers will be converted to hourly, and so they’ll lose certain benefits and prestige, and may view the shift as a demotion. Workers, including store managers, may have less flexibility to go the extra mile to do their jobs if their employer is intent on limiting their overtime pay. Some may be told to restrict their use of email or work-related phone calls after hours.