In April, word got out that the Department of Labor would be revising a section of the Fair Labor Standards Act in order to raise the ceiling for salaried-employees to be eligible for overtime pay. The rule was made official in May: the new threshold was raised from workers earning $23,660 or less to include those earning $47,476 or less, affecting some 12 million workers by certain estimates. Simply put, workers will earn more for their labor, or work less while remaining at their current salary. Here's a video primer.
But what does this mean for you? Let's answer some questions.
What's the catch here?
There's not really a catch. If you work more than 40 hours a week and make less than the $47,476 benchmark, you'll be paid time and a half for those extra hours. If your employer doesn't want to do that, they have to raise your salary above the threshold or limit you to a legitimate 40 hours a week. Your employer could shift you to hourly wages, but then you'd still be eligible for overtime because that rule hasn't changed. Your employer will have to do the math about which measure is a better value, but either way, you'll be getting more—be it time or money.
It's been 40 years since the threshold was changed, according to AccountingWeb:
Forty years’ worth of inflation has put a $23,600 per-year salary below the poverty line in today’s society, whereas in 1975, it placed someone in the upper 38 percent of workers. The poverty line for a family of four was $24,008 in 2015.
The economy is pretty strong, in the macro sense. If unemployment is low, that means people can find other jobs with better wages.
It's common sense for the threshold to go up.
Will this affect some people more than others?
Yes. The Economic Policy Institute has a nice breakdown of who's going to benefit, demographically. The answer, simply, is: women, workers under 35, and people of color. Look at these numbers though.
People who are working administrative support jobs (including those in the public sector), service industry (and hospitality), working-class college students, people like the no-longer-striking Verizon workers, and even agriculture will be among those making more money. People in Southern states are going to see more gains than any other region.
Weirdly, teachers are not eligible.
Bonuses and commissions (or any incentive-based pay) will only partially count toward reaching the salary threshold.
When will I start seeing these changes in my paycheck?
The new rules go into effect December 1, 2016.
Further, the new rule has built in escalators, so the threshold will increase every three years. The first one of those goes into effect January 1, 2020.
Am I going to have to do more paperwork? Who's going to keep tabs on my hours?
Your employer has to do it. The law already required your employer to keep track of all the hours worked in a pay period, and that's not changed.
Are there drawbacks to this?
Small town businesses could be affected. People making below the threshold may very well be able to live comfortable lives depending on where they live and their expenses. A business operating in one of these areas with thin margins may not see much growth, but it shouldn't affect jobs.
Are there any "fun" wrinkles to this?
Well, "glamour" industries like fashion and publishing are going to be affected, too. Young and ambitious workers who traded low-wages "and self-respect" in order to get groomed for a prestigious job at a talent agency or a consulting firm will be getting paid slightly more, but what the New York Times dubs the "Devil Wears Prada" economy is one where the businesses involved can most afford the extra pay. But! These industries are overwhelmingly white and affluent (some people can afford to make very little because they have outside assistance), so these new rules may open the barriers and see more people who couldn't live on an assistant's salary under the old rules enter into book publishing or film and TV production, increasing diversity in industries that sorely need it.
What's the worst case scenario you can think of?
Companies go full-on cynical and dive completely into AI and automation, reducing the number of jobs. But! At the same time, they're going to need humans to maintain those automated and AI processes—that means new jobs! Let's all learn to code, just to be safe.
David Matthews operates the Wayback Machine on Fusion.net—hop on. Got a tip? Email him: email@example.com