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Wage & Hour Laws

How Has Overtime Pay Changed in the U.S. Economy?


By Josh Young Mar 02, 2017

overtime pay 01

Prior to 1938, the standard work week was however long your employer told you to work, but in that year, President Franklin D. Roosevelt signed the Fair Labor Standards Act (FLSA) that established the 40 hour work week that we all know today.

To encourage this limit, the FLSA also established mandatory overtime pay, requiring businesses to pay a minimum one and a half times the standard hourly wage to non-salary employees that worked more than the prescribed 40 hours.

Since then, the act has been amended a handful of times, increasing the minimum pay threshold for employees that can be considered non-exempt salaried staff. As it currently stands, the most recent update was in 2004 when the minimum salary was set at $455 per week, or $23,660 per year.

New Regulations Stranded in Limbo

In 2016, President Obama signed a final rule to update the FLSA that would have taken effect December 1, 2016 and would have extended overtime benefits to any employee earning under $47,476 per year.

A lot has happened since then. The proposed changes faced a number of legal challenges, and the implementation date is currently on hold due to an injunction from the U.S. District Court that prevents the new rule from taking effect until the legal challenges are resolved.

The Obama-run U.S. Department of Labor (DOL) appealed this injunction but was unable to file the necessary court briefs before the inauguration of President Trump. Since Congress has not yet confirmed a Trump-appointed Secretary of Labor, the DOL has requested two delays for its appeals hearing.

At this stage, it is unclear what will happen with these new changes or if they will ever be put in place.

Small Business Response

According to one survey of more than 1,000 small business owners, 84 percent still planned to adjust their overtime policies to comply with the new law despite the delay. Further, among those surveyed, 61 percent of respondents stated that they were "indifferent" to the new regulations being blocked, while 24 percent were "relieved" and 15 percent felt "frustrated."

These numbers were particularly surprising as 42 percent of the respondents claimed in the poll that they were unaware of the new policy in the first place.

State Action

Given the ongoing delays and drama surrounding the federal regulations, some states are taking local measures.

Maryland is currently considering legislation that would make the delayed changes part of state law, making the federal rule irrelevant. And if this legislation passes, there is a strong possibility that other states will follow suit.

Actions Your Business Can Take

Whatever changes do occur, your business will need to support supervisors and managers as they accommodate any state or federal changes. Clearly documented policies and guidelines will help to keep front-line managers in step with updated rules, and training can also help to communicate and reinforce new policies and expectations.

Evaluate Roles

Now would also be a good time to review and update employee job descriptions and responsibilities. Whether the existing rule change passes or is replaced by an alternate plan, the update will likely reflect several new role-based exemptions that may affect compensation schemes for several of your employees.

Track Hours

If the injunction is eventually overturned, the rule may be put into effect retroactively as of December 1, 2016, meaning that your organization would be liable for back pay to any affected employees. As a result, you should thoroughly document any hours worked by employees that could potentially be affected by the rule change so that you have that information available if needed later.

Conclusion

When discussing overtime legislation in 2017, "uncertainty" is a commonly used term. Any current speculation on how the Trump administration will proceed in this arena is heavily based on anticipating the impending actions of current nominee Alexander Acosta. However, given that the previous nominee withdrew his name from consideration, these speculations are tenuous at best.

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