July 6, 2015 brought news from the Department of Labor of proposed legislation that could drastically alter the way many employers pay overtime. The proposal would raise the threshold at which certain employees qualify for overtime coverage under the Fair Labor Standards Act. As the current law stands, most workers are no longer eligible for overtime once their salary exceeds $23,660 a year. However, this proposed legislation would more than double that cut off to just over $50,000. It would also raise the overtime pay cap from $455 a week to $970 a week. Nearly 5 million white collar workers and other professional employees will be affected within the first 12 months of the new law’s implementation. Other professionals earning $50,000 a year or less could end up qualifying for time-and-a-half overtime pay.
Employers are now attempting to curb potential additional labor costs by streamlining operations. California currently employs overtime laws that are very similar to the proposed legislation, and the ways employers have reacted to these laws is anything but consistent. Some employers are choosing to take on more duties themselves to keep employees from coming in early or staying late, while others are hiring more workers to defray the need to stay all together. Many have converted salaried managers to hourly pay, thus eliminating the issue. Others are going to the extreme by drastically overhauling their overtime policies, and even limiting their employees’ access to e-mail outside of office hours.
If implemented this proposed legislation is estimated to cost employers an estimated $240 million to $255 million annually. The National Retail Federation estimates that simply updating payroll systems, converting salaried employees to hourly, and tracking hours in accordance with this legislation would cost as much as $874 million.
As for the timeline of this legislation, it seems to be on the fast track with an effective date in late 2016.