The regulations mostly affect workers in the restaurant and retail industry. Generally, companies must pay 1.5-times your hourly wage (“time and a half”) if you work more than 40 hours a week — even if you are paid a salary. But there are some exceptions.
For example, let’s say you’re an “assistant manager” at a fast food restaurant. Before the new rule, you were not entitled to overtime pay no matter how many hours you worked.
The problem is that this encouraged white-collar supervisors to pile more work onto rank-and-file workers who have “manager” in their title but actually functioned as laborers and clerks.
Here’s an explanation from the Department of Labor:
Critics say workers could actually lose out as employers avoid paying overtime by converting salaried workers to hourly ones. They also say it will create fewer advancement opportunities for salaried professionals.
House Republican leader Paul Ryan (R-Wis.) called the overtime rule an “absolute disaster” for the economy and said:
Who is hurt most? Students, non-profit employees, and people starting a new career. By mandating overtime pay at a much higher salary threshold, many small businesses and non-profits will be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether.”
The change goes into effect on December 1, 2016 and roughly doubles the current $23,660 threshold for automatic overtime.
Under the new rules, 35% of salaried workers (over 4 million Americans) will now be eligible for automatic overtime, according to Labor Secretary Thomas Perez. The department will update the threshold every three years to make sure it keeps up with inflation.
The changes were prompted by lawsuits against retailers like Chipotle and Dollar General by “managers” who said they were not paid overtime despite spending most of their 50- or 60-hour weeks on cash registers, mopping floors, and performing other low-skill tasks.
Overtime laws were created decades ago when the division between “manager” and “employee” was more clear. Today’s modern service economy is much less clear. In recent years, a number of high-profile class actions have accused employers of manipulating ambiguities in the law to avoid paying overtime.
Recent examples include Uber classifying drivers as “independent contractors” rather than employees to avoid paying benefits like minimum wage, overtime, unemployment insurance, and social security benefits.
In a similar case, FedEx agreed to pay $228 million to resolve a long-running dispute by pickup and delivery drivers who were misclassified as independent contractors.