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obama overtime rule

Overtime Overruled? Federal Judge Halts Obama’s Overtime Rule

Overtime for white-collar workers has recently been a hot topic. In May 2016, President Obama announced a proposed policy that would extend overtime pay for over four million American workers. But this didn’t go over without scrutiny.

The overtime rule that would have gone into effect on December 1, 2016, was officially blocked in November by U.S. District Judge Amos Mazzant, in Sherman, Texas. This could have some profound implications for many small businesses. If you have employees who are classified as white-collar workers, consider how this will impact your company.


Background on the Policy

A previous post in May discussed the upcoming changes to the Department of Labor’s overtime regulations. Since 2004, the salary threshold for white-collar overtime workers was $23,660, which was under the federal poverty level for a family of four.

Under President Obama’s new policy, the exempt salary threshold would increase significantly to $47,476. The goals were to ensure that hard-working Americans received an honest day’s wage and to keep up with inflation.


The Policy is Met with Resistance

Of course, the policy wasn’t popular with everyone. According to The Society for Human Resource Management (SHRM), “Twenty-one states and the U.S. Chamber of Commerce asked a Texas court to bar the overtime rule from taking effect.”

The primary reason for this resistance is that many business groups feel the new policy would increase their government costs dramatically and create financial hardships for many private employers. This could ultimately trickle down to increased layoffs, which would actually hurt the employees the policy was designed to help. The end result was federal judge Mazzant blocking the overtime rule.


The Implications

It’s important to note that the proposed overtime rule has not been stamped out. There’s still definitely a chance that it will go into effect at some point. The SHRM even suggests that employers should be prepared to follow it exactly as it was written.

However, with Donald Trump taking office in January, it’s reasonable to think that the rule could be dropped or at least appealed. Sources say that Trump is a proponent of a small business exception. An article on Fortune says, “Trump told the website Circa that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president, perhaps by exempting small businesses or delaying implementation.”


What Does This Mean for Your Business?

It’s hard to say for sure what the final outcome will be on the overtime rule. Although it’s likely that the rule’s impact will be limited, it could be years before employers are out of the woods completely in terms of an increased salary threshold for white-collar workers. For the time being, you should plan on complying with the rule.

The back and forth on issues like this can be frustrating for employers. But staying up-to-date on recent news is vital for keeping your business compliant. Be sure to stay informed on this topic if this overtime rule directly impacts your company.


Upcoming Changes to the Department of Labor’s Overtime Regulations

The Department of Labor (DOL) recently announced a proposal that will impact nearly five million white-collar workers who are currently exempt from overtime pay. If your business employs one or more of these workers who are exempt from overtime pay regardless of how many hours they work under the Fair Labor Standards Act (FLSA), this update could have a significant impact. The following serves as a heads-up to eliminate surprises in your future.


The Details

Information on the DOL’s website states the following: “On March 13, 2014, President Obama signed a Presidential Memorandum directing the Department to update the regulations defining which white collar workers are protected by the FLSA’s minimum wage and overtime standards. Consistent with the President’s goal of ensuring workers are paid for a fair day’s work, the memorandum instructed the Department to look for ways to modernize and simplify the regulations while ensuring that the FLSA’s intended overtime protections are fully implemented.”


The Purpose of These New Overtime Regulations

The proposed rule is meant to ensure that hardworking Americans who put in 40+ hours are paid fairly and able to make a decent living. It’s also designed to prevent employers from skimping on fair payment due to a technicality.

Since 2004, the white-collar overtime rules had a salary threshold of $23,660 annually or $455 per week. However, that salary is beneath the poverty line for a family of four. Under the old system, an employee could work 50, 60 or even more hours a week and still be below the poverty line if they have a family of four.


Increasing the Salary Threshold

The new rule would increase the salary threshold from $23,660 to $50,440 annually or from $455 to $970 per week. If you employ white-collar workers whose hours exceed 40 per week, they would need to earn at least $970 per week to be exempt from overtime pay.


When Will This Take Effect?

The new update will go into effect on December 1, 2016.


What Do I Need to Do?

If you employ one or more white-collar employees who are currently exempt from overtime pay, you have two options:

  1. Increase their salary to at least $50,440 annually so that it meets the threshold.
  2. Change their status to non-exempt, and pay overtime whenever they work more than 40 hours per week.

If you choose the latter, you’ll obviously need to track your employees’ hours if you’re not doing so already.


While these upcoming changes to overtime regulations won’t impact all small businesses, it can definitely throw a wrench in operations if you employ white-collar workers who happen to fall into this category. By preparing and familiarizing yourself with the changes, you can eliminate a lot of stress. Find more helpful information via these FAQs found on the DOL’s website.