Millions more managers, administrators and other professionals will soon be eligible for overtime pay thanks to new regulations put in place by the long awaited final rule detailing changes to the Fair Labor Standards Act.
Today's announcement by President Obama will come as welcome new to many Americans earning more than $23,660 but less than $47,476.
At the moment, managers, administrators and professional employees that make more than $23,660 can't receive time-and-a-half pay for overtime (working hours in excess of 40 hours per week). The final rule stipulates that workers earning up to $47,476 are eligible for overtime pay.
An estimated 4.2 million Americans will become eligible for overtime pay within the first year after the rule is implemented. Another 8.9 million salaried workers (both blue collar and white collar) could eventually benefit because their work duties don't affect their eligibility even though their income is above the threshold.
The duties test, which helps define a person as blue or white collar based on the duties they perform for their employer, will remain unchanged.
Business owners affected by their employees soon-coming overtime eligibility can either limit employee work time to 40 hours per week, raise workers salaries (above the $47,476 threshold), pay time-and-a-half for overtime, or find a solution based on a combination of these, as explained by the Department of Labor.
Is this rule really in the best interest of employees? The National Federation of Independent Business (NFIB) warns that, should this rule come into effect, a substantial number of employers will transfer many salaried employees to hourly wages, while those who stay on salary will have to punch in and out to keep track of their hours.
An even larger number of businesses will cut back hours so they don't have to pay employees overtime, according to the NFIB.
With the new rule and the changes that businesses will make to avoid it, probably only 1.2 million Americans will receive increased overtime wages and higher base salaries, according to the Labor Department.
But it will also mean that getting a promotion to management won't mean taking a pay cut by working more hours without overtime. President Obama and Secretary Perez believe that the new rule will safeguard white collar workers from abusive employers and improve the overall wellbeing of working Americans.
The Economic Policy Institute and other progressive groups have voiced their support for the new rule, but it is not going completely unopposed. Some pro-business groups and members of Congress have launched a counter-initiative to block the rule.
The Competitive Enterprise Institute (CEI) is leading a coalition of nearly 20 so-called free market groups to support counter legislation to oppose the new rule, which it says will hurt millions of workers by cutting back their hours.
Both members of Congress and the CEI have questioned the way in which the economic impact of the new rule was calculated.
According to an open letter published by the CEI, the Obama administration refused a request by Florida's Department of Economic Opportunity to check how much the new rule would cost the state's businesses.
After the request was denied, the FDEO did its own analysis and found that the rule would add $1.7 billion to payrolls across the state. The Labor Department, on the other hand, estimates the cost of the rule at a paltry $1.8 billion throughout the entire country.
Despite the opposition, the final rule as it was announced by the president today is set to come into effect on December 31, 2016.
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