The new Federal Overtime rules, which President Obama signed goes into effect December 1, may not provide as much of a pay increase as many workers have been led to believe. The Department of Labor increased the salary threshold for white collar workers and has promoted the new rule as a wage increase to American workers. However, many businesses are anticipating decisions other than “bumping” all employees up to the new exempt salaries.
The Fair Labor Standards Act (FLSA) was implemented in 1938 when President Roosevelt initiated the new law. The original provisions of the FLSA created fundamental standards that most workers today take for granted. Child labor was abolished, the 40 hour work week was set as a standard, overtime was created, and minimum wage was created. Under the FLSA, certain professional and executive positions were exempt from overtime pay. The original idea behind the rule was that higher white collar jobs provided a certain amount of flexibility and control over hours worked by the employee and so they didn’t need to be paid overtime. For many years, the salary threshold has been $22,660 per year, but starting December 1, 2016, the threshold will become $47,476. Additionally there have been expanded duties test to qualify for the status of exempt.