Q&A: How new US overtime rules could help or hurt employees

TAMPA, Fla. (WFLA) — The push to increase the minimum wage has received a lot of attention. While that debate goes on, the Obama administration is helping out millions of other American workers.

A change is coming for salaried employees, who don’t receive overtime pay. For the first time in more than a decade the rules for overtime pay are changing and that’s good news for millions of American workers.”

More than 4 million salaried employees will be now eligible to be paid overtime, that includes managers at retail businesses and fast food restaurants.

The Caspers Company owns several McDonald’s in the Bay area and is bracing for the change. “The impact as far as what we know impacts a small group of people we have working for us called department managers and some of them are salaried and again we will have to review the compensation plan for them,” said Casper Company Human Resources Director, Ed Shaw,

Under the new rules, the threshold that company’s can now deny overtime pay for salaried professionals and managers will increase from just over $23,000 a year to just over $47,000 a year.

“The employer will either have to increase their salary or start paying them overtime for the hours they work or insure that they only work 40 hours a week,” said U.S Labor Department District Director James Schmidt.

The new overtime pay rules are designed to to boost the pay of low-to-middle income workers. But, they’ll also have an impact on an employers bottom line.

“Anytime there is a mandated increase in what people get paid and changes in rules and regulations happen yes it it could impact us. It wont be a drastic impact, I think it is something we can compensate for,” said Shaw.

Employers will have to time to adjust to the changes announced by the labor department, since they will not go into effect until December 1, 2016.


In addition to retailers and restaurants, the new rule will affect many construction firms, hotels, home health care providers, nonprofits and colleges. Here are some questions and answers:


Q. Will managers at fast-food restaurants and retail chains who earn, say, $35,000 a year and frequently work 50 or 60 hours a week now be paid for all that extra time?

A. Perhaps. But there are many other possible scenarios.

The National Retail Federation says only about one-tenth of salaried workers who work overtime would likely receive raises high enough to lift them above the $47,500 threshold, which would exempt them from overtime pay. Workers who are paid above the threshold can still get overtime — unless they perform supervisory or professional duties, a so-called “white collar exemption”.

More than half of salaried workers below that threshold will likely have their base wages cut so that even after receiving overtime pay, their overall income wouldn’t change, the NRF says. And an additional one-third will probably have their hours cut to below 40 hours a week, the retail federation estimates.

Administration officials disagree that pay cuts will be so widespread.

“These are their most valuable employees,” Perez said Tuesday. “They go to the bank and deposit the money. … It’s irrational to lower the salary of your most trusted employees.”


Q. What other industries will be affected?

A. The National Association of Home Builders says that about one-third of construction firms will make changes in response to the rule. About half those companies said they will cut workers’ hours. A quarter said they would raise salaries above the new threshold level.

Colleges and universities might have to boost pay for research and teaching assistants, many of whom work long hours for low pay. Farmworkers, home health care providers, and hotel employees may also benefit.


Q. What will the economic impact likely be?

A. As with nearly everything about the rule, supporters and opponents disagree on that question. Perez says the rule will collectively raise workers’ pay by $1.2 billion a year, though that is just a fraction of the $8 trillion in wages and salaries Americans will collectively receive this year.

Even if employers cut hours for some workers to avoid overtime pay, they could be forced to step up hiring to ensure that necessary work is done. Economists at Goldman Sachs estimate that employers will create an extra 120,000 jobs in the year after the rule takes effect to offset a loss of hours.

The retail federation estimates that it will cost their retail and restaurant members $745 million to comply with the rule.

Information from the Associated Press was included in this report.


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