The U.S. Department of Labor announced Tuesday that it finalized revisions to the Fair Labor Standards Act (FLSA) that will extend overtime protections to millions of additional workers by raising the bar for overtime pay. The current threshold is just $23,660 but that number will double to $47,476 after which nearly all workers earning lower salaries will be entitled to time-and-a-half pay whenever they work more than 40 hours in a week.
“Even employers who favored a wage rate increase didn’t expect such a significant jump,” said Nannina Angioni, a labor and employment attorney and partner with the Los Angeles-based law firm Kaedian.
The finalized new rules will go into effect on December 1 unless they are challenged legally by opponents.
“Businesses can ensure compliance by tracking the hours for new categories of employees,” said Jason Walker, president of Americas with Deputy.com.
Mary D. Smith expects proposed new overtime rules to significantly impact her payroll business. “There is a potential for substantially increased costs,” said Smith who founded Reliance Payroll and acts as the firm’s human resources and payroll manager.
Less experienced workers new to the workforce stand to gain because millennials, for example, tend to start out in entry level positions where they earn $30,000 to $40,000 a year.
“The change from salary to hourly should increase the compensation paid to millennials as they'll now receive overtime pay when they work more than 40 hours per week,” said Steven Rothberg, president and founder of College Recruiter, a career oriented website for recent college graduates.
According to DOL data, the new rules will impact 4.2 million Americans and some companies are reportedly already planning ways to get around the new rules if enacted.
“I am hearing that small business owners plan to reduce full-time workers down to part-time and hire additional part-time workers to carry the load without the increased payroll costs,” Smith told Newsmax Finance.
Business owners can expect to start tracking overtime, meal breaks and rest periods to ensure compliance with general labor laws when exempt employees are reclassified as non-exempt.
"The psychological impact of time tracking on the average professional worker is limiting to their growth,” said Diya Obeid, founder and CEO of JobDiva in New York. “Staff will no longer feel empowered or free.”
Companies may also be required to shift duty responsibilities so that work can be completed on a 40 hour work week schedule, which could involve changing employees’ roles, training them for new duties and implementing a new system of operation.
“In the final analysis, these new regulations do not really change the basic law of the FLSA exemptions but they will nonetheless cause a good deal of financial pain in many businesses and industries as companies adjust to the new salary thresholds,” said Barbara Hoey, an attorney in the labor and employment legal practice with Kelley Drye in New York.
Workers in certain industries may experience more financial pain than others because of these new regulations especially in service sectors such as health care, hospitality and retail.
“This law is outdated and does not reflect today’s empowered, flexible work environment," Obeid told Newsmax Finance.
Depending on the industry, businesses may now need to require their lower level supervisors, managers and professional staff to maintain time sheets or to log in to a time tracking system even when they are telecommuting.
“This is quite a change for an employee who for years has enjoyed flexibility as an exempt employee," Angioni predicted.
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