Overtime Eligibility for Salaried Employees Set to Increase on December 1st

An update to the Fair Labor Standards Act (FLSA) will increase the threshold for workers receiving overtime pay. Under the new rule, salaried employees who make less than $47,476 a year will be able to receive time-and-a-half pay when they work more than forty hours a week. With existing FLSA regulations, only salaried employees making under $23,660 a year and hourly workers are eligible for overtime protections.

The new regulation, which was championed by the Obama Administration and considered a necessary adjustment for inflation, is estimated to make over four million additional American workers eligible to receive overtime pay.

Some employers and commentators have voiced concern over the size of the increase and the ability of small businesses to adapt without having to reduce services or increase prices. Businesses could also skirt the rule by imposing weekly caps on hours worked or replacing full-time positions with part-time workers. 

A study by George Mason economists Donald Boudreaux and Liya Palagashvili found that the new overtime regulations will likely have little effect on overall earnings, as employers reduce the base salaries of their employees in order to comply with the new regulation. Increasing the amount of employees receiving overtime pay would likely reduce employment levels and increase the compliance costs that firms face, according to the study. On the other hand, research conducted by the Economic Policy Institute found that the new rule will directly benefit 12.5 million workers, which includes 6.4 million women and 4.5 million workers aged 16-34.

Regardless of what economic impacts the new policy may have, its effects may not last long with a new president taking office in January and Republicans controlling both chambers of Congress. Under the Congressional Review Act, Congress can vote to rescind regulation approved under the previous administration within sixty legislative days.