Am I Affected By The New Overtime Rules?

Who Does the New Overtime Rules Benefit?

On May 18, 2016 the Obama administration announced an update to the overtime rules in this country. Following the announcement many people predictably wondered whether they would be effected by this rule change. While I cannot comment about the economic impact and change this new rule will have on you individually I can comment more broadly on the rules.

To understand the rule change you must first understand what the rule was before. Essentially, Federal law dictates that employers must pay their employees 1.5 times their normal rate for 8-12 hours worked  in a single day—or any amount of time above 40 hours in a single work week, and double their normal rate for any hours worked above 12 hours in a single day. This rule applies to everyone…except for the people it does not apply to.

There are various exemptions to the overtime rule, the most common of which are the white-collar exemptions, which I will cover here. A white-collar exception generally means that you are a salaried executive (someone who can hire/fire someone), a salaried administrative employee (someone whose job duties primarily deal with the management/business operations of the business and someone who has substantial autonomy to act), a salaried professional (someone whose job requires extensive training/knowledge and is autonomous), a computer employee (essentially a professional but without the salary requirement and specific job duties), and a highly compensated employee (an office employee that gets paid a lot).

Whether you belong to one of those categories is determined by a multi-element test and will be more fully discussed at a later date. However, a requirement that each of these exceptions has in common is that you don’t have to pay overtime to that person if you pay them a certain amount of money. For every category except a highly compensated employee that amount was $23,660/year and for a highly compensated employee that amount was $100,000/year.

And that is what this change is all about. Now, if you fall into one of the white-collar categories but your base salary is at $47,476/year ($134,004 for highly compensated employees) you can still receive overtime. So while the media has done a fantastic job of telling us the increase for overtime rules, they have done a poor job of explaining the scope of the rule change. It is actually a rather small rule change that doesn’t really change anything about the current system other than what amount you have to make to potentially be an exception to the general overtime rules.