Why overtime eligibility expands to millions this year

Jul 7, 2016

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A new labor rule going into effect later this year opens overtime wage eligibility for some currently-exempt, salaried employees.

“The issue really is the amount of salary it takes to be considered exempt.”

Paul Sicilian is a Grand Valley State University economics professor with a special focus on labor.

Coming into June, the U.S. Department of Labor finalized the rule as part of amendments to the Fair Labor Standards Act - raising overtime exemptions of certain salaried workers from $23,660 to $47,476.

Sicilian says that means quite a bit more employees will be eligible for overtime – just how many, he says, is a source of debate.

“So it’s going to bring in quite a bit more people, as covered by the (new) overtime regulation. Exactly how many people are covered by it is a little unclear. Because the rules are a little bit complicated. What defines you as an executive or manager is not clear-cut.”

The Department of Labor puts the number of impacted employees at more than 4 million people.

Sicilian says other think tanks like the Economic Policy Institute say the number is more than 12 million.

Regardless of impacted workers, it’s certainly a jump.

Sicilian says that’s because the department hasn’t changed the number – the $23,660 – for more than 10 years. Moving forward, he says they’ll be doing it every three years.

“So what you ought to see now is under this regulation is it’ll change more frequently, but you won’t see such large jumps.”

“What you saw since 2004 is the percentage of the people covered under the (previous regulation) shrunk a lot. So that, I think, is an interesting way of measuring the need for the increase – rather than looking at what looks like a big jump in the salary that gets covered.”

Sicilian says the three-year review should correlate more with things like inflation – meaning the numbers won’t seem so extreme.

Come back tomorrow for part two of this story, as WGVU explores the impact of what these changes may mean for an employee – and employer’s – bottom line.