are the new overtime rules about to boost your paycheck?

by Alison Green on May 9, 2016

Note: The new law discussed in this post was blocked the day before it was set to go into effect.

A new regulation that’s widely expected to become law later this year might result in you receiving more money in your paycheck.

The move stems from a change to the nation’s overtime laws. To understand it, you need to know that the federal government divides all workers into one of two categories: exempt workers, who are not required to receive overtime pay, and non-exempt workers, who must receive overtime pay. (Overtime pay is one and a half times your normal hourly rate for all hours you work beyond 40 in any given week.) The exempt category is reserved for employees who perform relatively high-level executive or professional work, outside sales employees, and a few other narrowly defined categories. You also must earn at least $23,600 a year to be considered exempt.

If you’re thinking that $23,600 doesn’t sound like a high enough salary to be exempt from earning overtime, you just spotted what the change is designed to address.

That salary threshold was last set in 2004, so over a decade has passed and it hasn’t increased with inflation. As a result, an increasing number of workers with relatively low salaries are working long hours for no extra pay. Labor advocates argue that the overtime exemption was intended for relatively highly-paid, skilled professionals, and that it was never intended to cover, say, a restaurant manager working long hours and earning $30,000 a year in today’s money.

The Department of Labor has proposed raising that threshold to $50,440, more than double the current level. That means that if you earn less than $50,440, your employer would need to pay you overtime when you work more than 40 hours in a week – no exceptions.

In practice, employers are likely to respond to that in a few different ways. If you currently earn less than $50,440, your employer might decide to do one of the following:

  • Your employer may raise your salary to the new threshold of $50,440 in order to keep you exempt. This may be the most cost-effective option if you work significant amounts of overtime.
  • Your employer may require you to start tracking your hours and limit you from working overtime (in order to avoid new costs of paying for that overtime).
  • If you regularly work more than 40 hours a week, your employer might choose to reduce your base hourly wage to account for the overtime pay you’ll need to receive, in order to ensure that your overall annual compensation stays about where it is now.

Additionally, the change may impact more than your hours and your pay. If you’re used to having flexibility in your schedule and not having to carefully log your hours, you might need to adjust to life without those benefits:

  • If you become non-exempt under the new regulations, you and your employer will be required to track your work time – even including things like quickly logging into your email from home.
  • If you currently flex your schedule to follow the ebbs and flow of your work and your commitments outside of work, it will get harder to do that. For example, let’s say that currently your employer lets you work 50 hours this week, 35 hours next week, and 40 hours the following week, trusting you to simply get the job done without scrutinizing your hours. If the new rule makes you non-exempt, your employer may be less willing to let you do that – since they’ll be required by law to track all those hours and pay you overtime for any hours over 40 in a given week, even if you work less than 40 the next week.
  • Earlier this month, George Mason University’s Mercatus Center published a report predicting that “employers may require telecommuters to start physically showing up for work so that they can track and monitor the number of hours these employees work.”

Currently, businesses are still waiting to see exactly what the final rule will say and when it will go into effect. The Department of Labor is expected to issue a final rule any day now, and it’s likely to have an effective date around Labor Day.

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{ 102 comments }

{ 102 comments… read them below }

  1. Pwyll*

    There’s been a lot of murmuring in the past week or so that OMB (effectively, the White House) is requiring DOL to lower the proposed threshold. There are a few reports out from CNN and Politico that the threshold will likely be closer to $47,000. All just rumors, of course, but interesting just the same.

    1. Ask a Manager* Post author

      Yes! I’m going to talk about that a little more in Friday’s news round-up. (I wrote and submitted this before those articles came out.)

      1. Pwyll*

        I’m not sure the revised threshold really changes any of your advice, or everyone’s concerns. It’s still a huge leap in a short period of time. :)

        1. Ask a Manager* Post author

          Yep, doesn’t change the advice — but might change the calculation for people, depending on where their salary is. But really, we won’t know the final numbers until they get released. It’s all speculation right now.

  2. hayling*

    Thanks Alison, this is really helpful! I appreciate you breaking down the regulation into plain English.

  3. Sophia Brooks*

    Ugh I am so stressed out about this! For twelve years I have been an exempt employee at one part of my university, and then I get extra compensation for teaching theatre/making costumes from another department. I make close to 50,000 total, but my salary is only 38,000, so I would no longer be exempt. The university does not allow non-exempt employees to receive extra compensation from a different department for more than 4 weeks, and I work for 2 15 week semesters. Plus they would then have to pay me overtime on my hourly rate! Also, no one here seems to care or even know what is coming, and it is going to hit the theatre department hard when they have no costume teacher/maker on labor day. And/or, I am going to do work, and they won’t figure it out until they go to pay me and it doesn’t go through!

    1. Melissa*

      Sophia,
      It’s my understanding that teachers aren’t included in the new rules. I can see how your situation could go either way though, since you are a worker AND teacher. I’m a teacher (FT) at a cc, and my understanding is that it won’t affect me at all.
      Going to be interesting.

      1. Sophia Brooks*

        I actually think what will happen is that I will get a joint staff/faculty appointment, 90 percent staff, 10% faculty. The problem for me would be that ties me to the faculty role for the rest of my time here, because I don’t think my staff people would keep me at full time after that, if I lost the funding from the theatre. Right now I am 100% staff, and the rest is “extra”.

        1. Brett*

          There is also a separate education administrative exemption that might apply to you, depending on the nature of your staff duties. It is similar to the teacher exemption that there is no set threshold salary, but there is a requirement that you are paid on the same salary basis as a new incoming teacher to the school.

      2. limenotapple*

        My university said the same thing when they addressed this. I am curious though, my job is classified faculty, but I am a regular 8-5 employee, so I’m not sure how it will work for people in my position yet.

    2. Ask a Manager* Post author

      That last part won’t happen — if you do the work, they have to pay you, although they could tell you to stop doing it after that.

    1. Pwyll*

      Generally not unless precipitated by some other unlawful conduct (discrimination based on a characteristic, like race or sex, for example).

      1. jhhj*

        (Because here in Canada it’s constructive dismissal if you reduce pay by about 20%, or if you reduce it by 14-17% and also do something else to make things worse at work — change the hours, change the work done, etc — and probably not if you reduce it by 10% or less.)

    2. BRR*

      I think reasoning behind the salary reduction would negate a salary reduction on its own. That your employer isn’t just cutting your salary solely to pay you less.

    3. Koko*

      Under U.S. law as with so many other workplace laws it relies on what a “reasonable person” would do. If the change in conditions (including salary) are so intolerable or aggravating that a “reasonable person” would feel compelled to resign. So there’s no hard and fast number you can rely on, but as a non-legal-professional I would think 15-20% probably has a pretty good shot at being seen that way.

    4. Ask a Manager* Post author

      In this case, they’d be reducing the hourly rate to keep you at the same overall pay, which I doubt would count as constructive dismissal (since there would be no significant change in your take-home pay).

      Of course, constructive dismissal is only really relevant if you want to be able to quit and collect unemployment anyway; it’s not something that’s inherently illegal.

  5. Larry*

    I think I’m going to be one of the workers impacted by this because my salary is in the low 40s. However, with my yearly bonus it is above$50.440. I get my bonus the last working day of the year. Do these new rules take bonuses into account?

    1. Nighthawk*

      That probably depends on the nature of the bonus. Is that guaranteed or dependent on business results?

        1. OfficePrincess*

          It probably won’t be considered, though without the final rule, we can’t be certain. But even from the POV of your employer, if makes a lot more sense to not include your bonus in the calculation. Since it’s not guaranteed, they would owe you back pay if they ever had a lower bonus year.

      2. BostonKate*

        We have bonuses based upon our performance, up to 10% of our salary. Even if I get the full 10%, I still won’t even come near $50,000. My company hasn’t made any announcements about this, but I’m curious how they’re going to handle it.

    2. Pwyll*

      DOL asked for comment on whether it should allow non-discretionary bonuses to be used to calculate whether someone satisfies the “salary basis” test. I’m not sure it’s public yet what the final answer is as to Bonuses.

  6. PegLeg*

    This may be a silly question, but one I am having trouble understanding. The functions of my job fall squarely into the exempt category. I have a professional degree that required extra schooling and use the knowledge from that specialization regularly, and I supervise two FTEs as well as hire/fire/make employment recommendations for the program I oversee. I am also paid less than the proposed new exempt threshold. My understanding is that employers can’t bounce around and decide if you are exempt or not, so would they have to pay me the minimum threshold?

    2. OfficePrincess*

      They can treat an otherwise exempt person as non-exempt, but can’t treat someone who should be non-exempt as exempt. Basically, they can do more than the law requires but not less, so they can decide to treat you as non-exempt since you wouldn’t meet all of the requirements (salary threshold), but they would then be required to treat you as non-exempt in all ways, including paying you overtime.

    3. Meg*

      They can decide not to give you a raise. Even though you meet the “duties” test, you won’t be exempt because you don’t meet the “pay” test so you would be entitled to overtime. They can give you duties that would meet the requirements for being exempt but still classify you as non-exempt because of your pay.

    4. fposte*

      Non-exempt is where you get your legal protections, so it’s the default state. You can be non-exempt and do everything you’ve described. You can be non-exempt and be a Nobel prize-winning scientist.

      For you to be considered exempt, you’d have to meet *all* the relevant qualifications before your company would be allowed to take away the protections afforded by non-exemption. You couldn’t just do the duties but not make the threshold salary, or make the threshold salaries but not do the duties.

    5. Ultraviolet*

      If your salary is below the new threshold, you will be non-exempt when the new threshold takes effect. That’s because in order to be exempt, both your duties and your pay have to qualify for exemption. If neither qualify, or if just one qualifies, you are non-exempt. (Generally speaking.)

      I think your question might be, “Is it legal if my job function qualifies for exemption but my pay doesn’t?” and the answer is, “Yes, as long as you’re treated as non-exempt.” If your employer wants you to be exempt after the new threshold is enacted, they would have to increase your pay above the threshold. But they aren’t obligated to raise your pay above the exemption threshold just because of the fact that your job function passes the function-related part of the exemption test.

    6. Oryx*

      Employers can make exempt people non-exempt. So, you can have all the duties that pass the exempt test and it’s still totally legal for them to consider you non-exempt, as long as they treat you as non-exempt and pay you for all hours and OT.

      What they can’t do is take people who should be non-exempt and make them exempt.

    7. ScarletInTheLibrary*

      And something that doesn’t quite work is that the cost of living for large metro area is different than rural county area. I think about the salaries of library directors in say Wyoming, and it’s likely less than mine in big city (which sadly is in the low 40s and we’ve been told we will be losing our ability to earn comp time for manning library events). I think it will be interesting to see if salaries in low-cost of living areas go up or services get cut.

  7. CS Rep By Day, Writer By Night*

    How does a company go about reducing an “hourly wage” when someone is salaried? Where I currently work there is a very clear division between hourly and salaried positions – it would be weird in the extreme if my company suddenly started talking about my compensation in terms of a hourly wage.

    1. Ask a Manager* Post author

      If the change makes you non-exempt, they’ll need to calculate your hourly wage (salary divided by number of work hours in a year) in order to pay you overtime.

    2. Mike C.*

      There are lots of places that do this without any trouble. A standard method is to take your salary and divide it by 2080 hours.

    3. Judy*

      An example:

      If your salary is 40k, your hourly rate would be 40k/(52 wks*40 hrs) or about $19.23/hr. If you generally work 50 hours, they could back calculate an hourly rate of 40k/(52 wks* 55 hrs) to get a “new” hourly rate of $14.55 assuming 10 hours overtime at time and a half. Theoretically your take home pay would be the same.

      Of course, your base rate can’t go below minimum wage.

      1. Nerfmobile*

        Yes – I am exempt and clearly so under the professional duties of my job. My salary is also well above 50k. Even so, my paycheck shows my pay as being calculated on the basis of a 40 hour work week at an hourly wage calculated as my annual salary divided by 2080.

      2. just a thought*

        Yes, I am exempt (salary just about what the proposed new minimum would be) and my pay stub still has a listed hourly wage. My work will actually let me get paid overtime (at time and a half) for working on Sundays, and overtime the rest of the week is given as comp time.

  8. Amy S*

    I’m really concerned about how this is going to impact my flexibility at work. Unless the threshold is significantly lower, I don’t see my employer raising my my salary. I have already received an increase of about 10 percent over the past year and I’m still significantly under the $50K mark.

    I typically don’t work crazy hours year round, but 1-2 months a year I do work well over 40 hours a week. There was one week over this past year where I worked over 70 hours. I have no idea what my employer will do but I foresee my status being changed to hourly and having to track my hours, take a lunch every day, etc. We get Fridays off during the summer to make up for our busiest months and I have a feeling I will lose that perk. There’s really no point in speculating or worrying about it until the laws are passed and my employers speaks to me about the specifics, but I can’t help but stress over it a little!

    1. Mike C.*

      There’s no reason for scheduling flexibility to go out the window unless your employer is completely unwilling to figure out how other employers have been doing it for years.

      1. Ask a Manager* Post author

        In Amy’s case, her employer would owe her time and a half for those 1-2 months, so of course that’s a big change that could affect how they handle her schedule.

        1. OlympiasEpiriot*

          We do summer hours at my company where we work 8-6 w/ a 45 minute break for lunch and then no Fridays (unless you’re one of the support people in rotation or a partner on duty or your projects just keep you working…we are always supposed to “work to the job”). Regular time is 8:30-4:45 w/ that same lunch break.

          I’m sure they could figure it out.

  9. Employment Lawyer*

    This really sticks it to residents of the cheap states. $51k in Massachusetts is not so bad, since that’s 20% below the state median household income; a lot of folks are already there and there is plenty of room above the limit.

    In Arkansas it’s thirty percent more than median household income. Which, well…. was the goal “don’t let any lower end business in Arkansas hire folks on salary?” Because that is going to be the outcome.

    In any case I am fascinated by the two radically different assumptions:

    DOL seems to think “if we raise the limit, then ERs will just start paying for OT, so employees will be happier and make more money. The ERs will just pay themselves less.”

    All the employers I know think “I’m not going to pay any more in the long run. If they raise the limit, I will have to take away flexibility from employees, which a lot of them really want. I’ll have to track hours, which a surprising number of people don’t like to do. And I’ll probably end up spending much more money to deal with all the requirements, which will have to come from somewhere–probably wages and benefits.”

    I hope DOL is right, but I doubt it.

    One thing for sure, it is going to really hit training pretty hard. Lots of new hires are bad moneymakers in the first year. They compensate for future job advancement by working more, for lower pay, while training. Employers can’t easily do that (or will do less of it) if you make it more difficult.

    1. Mike C.*

      The complaints about tracking hours are laughable. How can I take those concerns seriously when I can track every last rivet and fastener in a wide-body commercial airliner?

      1. Ask a Manager* Post author

        I take it seriously. I think it would be a huge pain to start tracking my hours, given the way I work (which is spread out all over my days and my life). It depends on the nature of the job.

        1. Sophia Brooks*

          Not only is it a huge pain because things are all spread out- the last time I was hourly there was so much pressure to both clock in “to the minute” of what we worked AND to hit 40 hours exactly (no over or under) AND not be late or leave early that it was really stressful. So if I was on a phone conversation and had to stay 2 minutes late, then I had to somehow NOT work 2 minutes elsewhere in the week. Which seems easy, but not when your lunch is automatically punched for you, and you can’t come in late or leave early. It was hell on earth, and some of that was obviously poor management, but it was pretty ubiquitious where I work.

          I had one boss tell me that overtime was only approved in advance, that she would never approve overtime, but if she gave me work late in the day that needed to be completed before I left, it would be my choice whether to stay and complete it or not and would be reflected in my review. I left for a different department, where the director made her assistant call me if I had overtime and ask me to change my time to reflect no overtime. That was over less than 5 minutes of overtime.

          My current boss would never be like that, but I am not sure she would be approving my overtime anyway, because at my current job only central accounting has access to budgets and has to approve everything down to the pens you order.

          1. Nicole Parker*

            I think the flexibility aspect is going to be the hardest for a lot of employees to take, especially in businesses where employees are often off-site and start work from locations other than an office … or even for the flexibility of working from home. A lot of employers are already skeptical of whether someone working from home is really working. If they cannot see that a person showed up at 7:55 AM and they know they have to pay for every minute worked, they are less likely to allow those employees to continue those arrangements because it becomes more difficult to track. On the other hand, I completely empathize with people I know who work retail or restaurant “management” jobs who are paid very low salaries and required to work 60-70 hours per week with no additional benefit to them for the extra work. It’s really a catch-22, but I still don’t believe the DOL “got it right” this time.

            1. Mike C.*

              Again, this is a problem with the employers, not the regulations. If they don’t trust their own employees to work then management needs to hold them accountable or find ways to hire/retain better employees. It’s obviously not a pleasant situation to be in, but I’m not sure how to regulate a manager not treating employees like children.

              Your last example is one of the big reasons these changes are coming on board.

            2. Observer*

              I do see how these regulations will impact flexibility. But the issue of working from home is nothing more than a smokescreen. The reality is that employers can’t know if people are working every minute even when they are in the office. And, the ones who come close to that have put themselves in a position where unpaid overtime is going to be much more dangerous for them, because it’s going to be MUCH harder for them to argue that they couldn’t have known that their employee was working overtime.

            1. Sophia Brooks*

              It is, but it was my reality, and (especially since I live in a low COL area) annoying to me to have worked my way up through promotions over the past 15 years so that I no longer had to do that. I do not want to do it again. I still work for the same place. It is the largest employer in the area (by far). I make over twice the median income of my area, and I am still over $10,000 lower than the new threshold. I have many choices, but I really wish that the cap was based on COI. I know it is probably the “right thing” but it makes me feel awful.

          3. Observer*

            Well, for this to work in any sane fashion, enforcement is going to have to be better than it is. But, actually, smart employers know that if you really don’t want people to work overtime, some flexibility is important or you have to change expectations of timeliness. Because basically what your boss was saying to you was “I’m never going to approve and pay overtime, but I’m going to punish you if you don’t work overtime.” That’s both stupid and illegal. But, too many bosses don’t care about illegal unless there are some real teeth.

          4. boop*

            Yeah, some timeclocks are good and some are bad. The one I have to use rounds up or down to benefit my employer. So if I start early, I’m not getting paid until scheduled start time. If I’m literally one second late, I lose a full 15 minutes of pay.

            On the other end of the day, if I work right up to the end of my shift (because of course I do), but my last task takes me five or ten minutes longer than I expected, as soon as I clock out those five or ten minutes is trimmed off of my pay. If I accidentally clock out at 4:59:59 instead of 5:00:00, they punish me for it by taking off yet another 15 minutes from my pay. It pretty much always works out in the employer’s favor. Not to mention staffing so that only one person is working and thus cant take a legit break, but deducting 30 mins anyway if there was any food eaten.

            I miss the timeclock my last employer had: clock in whenever, clock out whenever, clock out/in for lunch breaks and then the computer calculates the time. Perfectly accurate, no wage theft needed.

            1. Observer*

              What your boss is doing is almost certainly illegal. It IS legal to round – but it needs to be small, and it needs to be consistent, not biased to favor the employer. In other words, it can round to the nearest quarter of an hour but it must ALWAYS round to the NEAREST quarter of an hour, which means sometimes up and sometimes down depending solely on the number of minutes.

            2. Gene*

              Regarding the “legit break” issue, they owe you a pile of money. This from https://www.dol.gov/whd/regs/compliance/whdfs22.pdf

              Bona fide meal periods (typically 30 minutes or more) generally need not be compensated as work time. The employee must be completely relieved from duty for the purpose of eating regular meals. The employee is not relieved if he/she is required to perform any duties, whether active or inactive, while eating.

              If you are not completely relieved of duties, you are in pay status; it doesn’t matter if you are eating or not.

        2. Mike C.*

          A personal inconvenience maybe, but it’s not the impossible problem that too many are making it out to be. There are tons of accepted techniques and tools for a wide variety of occupations, company sizes and regulatory regimes.

          And let me be clear, when I point to the fact I can find the complete provenance of any installed part of a twin-aisle aircraft, I’m not saying that to claim “I’m already overburdened, so suck it up”, I’m trying to point out that if we can do that with relative ease, then tracking hours isn’t all that bad. We have computers and databases and programs to do the hard work of that.

          1. Meg Murry*

            Mike, it isn’t the “how” to track hours (like you said, computers and databases, etc). It’s the “it’s such a pain, I don’t want to” part that stinks.

            If a company just plans to do it by having me hand fill in a time sheet that I sign (or typing in hours into an Excel sheet or a specialized database) I have no problem filling it in with “8” every day – or 8.5 or 10 or whatever when appropriate. But right now part of the flexibility I enjoy as a salaried employee is that I can take time in the middle of my day to deal with personal life things like researching which doctors are covered under my insurance plan and then calling and making appointments for them, or spending 30 minutes on a phone call with my son’s teacher. I do this knowing I”ll make up the time later in the day – but if I’m punching a clock, I’m not going to go clock out every time I get a personal phone call. So I’m cool with manually tracking time – but I don’t want to nickel and dime my employer over every 15 minutes, and I don’t want them to do it to me either.

            Don’t get me wrong – there are positions where people are forced to work a crazy number of hours that are completely unfair, and those positions should definitely get paid overtime.

            It’s not the “how to track the time” that you are mentioning that people have a problem with – it’s the overall issues that come when a employees that are used to having flexibility and are used to being treated like adults who can manage their own time as long as they get their work done.

          2. Employment Lawyer*

            Each individual issue standing alone is not necessarily a problem. Combined, they are a much larger burden than most folks realize.

      2. Silver Radicand*

        I check in with my worksite every 20-30 minutes for just a few minutes each time until I arrive onsite. I then handle guest concerns on call over the weekend and do purchasing and repair runs, often in the midst of other things through out my day. These sort of duties are difficult to track time-wise because they are often but short. Tracking in a timeclock program could literally take as long as the duty itself. Which becomes onerous to the employee and more expensive to the employer.

        1. Small town reporter*

          This! My work requires a lot of flexibility, and having to write down and track ever 20-30 minute phone call or email exchange (or updating Facebook or our website) would take way more effort and energy.

          1. OfficePrincess*

            And then when you have to get a back and forth going to solve an issue on a weekend, each text may only take me 30 seconds to read and reply to, but when it’s 10-20 over the course of an hour trying to troubleshoot, it becomes a huge pain to track.

            1. (Not an IRS) Auditor*

              I’d say you’d put down the whole hour. It’s not just the time reading / typing, it’s the time in between when you’re thinking about the problem.

        2. Elizabeth West*

          If you’re on call but not working all the time, you would have to clock in and out when you actually do something? That would be a nightmare for me. I typically clock in, work eight hours, and then clock out. I don’t have to do it by task.

    2. Koko*

      >> All the employers I know think “I’m not going to pay any more in the long run.”

      I’m not sure I see how that’s possible unless they’re going to try to make their employees do 50 hours of work in only 40 hours from now on. They are either going to get less work out of their employees, or have to pay them more. I don’t see a scenario where they get the same amount of work for the same amount of money.

      1. Judy*

        See my note above. If you calculate an employee’s base rate including overtime, and then start paying them based on that, they will get the same amount of work with the same amount of money.

        1. Observer*

          In some cases that will work, so it’s a wash, except that at least it’s clear to everyone what is really going on. And that’s a good thing. But that is NOT going to be universal at all. And that’s why so many employers are making all of these other claims, some of which are nonsense.

          Even at the Federal minimum wage, you the least you can pay someone who regularly works 60 hours per week is just over $500 per week. Over half the states have minimum wages above the Federal threshold. All of these people are going to see a reduction in hours or an increase in pay in any law abiding company.

          I do think that the DOL jumped too high, too fast. And I do think that the regulations need a bit more flexibility built in (or a change in the law to allow that flexibility). But, I think that the essential move was long overdue. And I think that the silver lining in this jump will be that Congress FINALLY looks at some ways to bring these laws up to date to allow better flexibility.

  10. Lillian McGee*

    My boss thinks we won’t have to worry about this because “they make exceptions for nonprofits” … Not really! Our auditor had to really school her on W2 vs. 1099 appropriateness. I am so anxious about this!

      1. De Minimis*

        I think ours is getting around it by everyone having a level of program duties to where we’re all under the administrative exception. We also have a lot of student employees and many of us are given some kind of hiring and/or supervisory role with them.

        We’re also all paid above the threshold, but as I’ve learned here, that isn’t enough to say someone is exempt. Personally, I think there’s an argument that some of us shouldn’t be exempt [myself included] but I’m hesitant to point that out as someone who is relatively newish and on a team with the people who determine policies so I’d basically be going against my team members and would probably cause myself problems with my superiors.

  11. Bridget*

    How does this work for people who work on commission? I have a low (mid 20s) base salary and earn commission on events that I book (I’m a catering director). I work probably an average of 60 hours per week, and it’s not always easy to track because clients call or text my cell phone semi-regularly and I’m always checking my email on my phone. With commission I’m probably making to 40k per year, so…do they raise my base salary so that I *should* make about 50k per year? Or will it be required that my *base* salary be 50k?

    1. BRR*

      I’m guessing there might be an exception like how currently there’s the outside sales exemption which I believe you fall under.

      1. Bridget*

        To qualify for the outside sales employee exemption, all of the following tests must be met:
        • The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
        • The employee must be customarily and regularly engaged away from the employer’s place or places of business.

        I qualify for the first, but not the second. I’m not outside sales—I work almost entirely on-site (I don’t go elsewhere to make sales, I work at a country club). So I guess I’m “inside” sales and it doesn’t look like I fall under that exception, but I wonder if there’s another that I’d fall under somehow.

        1. BRR*

          Ah I didn’t catch the on-site part. This is easy for me to say because I won’t personally be affected but we all just have to wait and see.

    2. Quadra*

      Adding on to this question – my base is $50k, but with commissions received, I typically make $175k+ per year (with commissions paid at non-regular intervals throughout the year). To clarify, I’m quasi-sales earning a fixed % of fees earned, but not directly in sales/located off-site/a contractor by any stretch. I can’t imagine that I’m impacted, but I do wonder.. what really matters here?

  12. Rhiannon*

    I totally understand all the complications that would come with this change and why some people would not like it and the way it effects their jobs. But I personally have my fingers crossed that it happens. I am exempt, make low 40’s (in one of the highest COL cities in the country), work 10-20 hours unpaid OT every week, and get no flex time in return. It would definitely cost the company more to pay me OT than to raise my salary to meet the threshold and that bump in pay would make a big difference to my quality of life. So here’s to hoping!

    1. tango*

      I sometimes think what employers will do is say no more OT. And either let the work go undone, pressure current workers (especially those who are lower performing than others) to produce more or hire part timers.

      1. Christopher Tracy (formerly Doriana Gray)*

        This is what they did to us support staff at Evil Law Firm. They suspended OT because people like me were working all of the available hours (which came to 20 extra hours a week) and they had to pay us time and a half (and I was still a long-term temp-to-perm worker, so they were paying my staffing agency double that – ditto for most of the other support staff). However, they ended up bringing it back a couple months later because our workload fell even further behind and no amount of temps would have helped the situation (we didn’t have time to train anyone). Eventually Evil Law Firm wised up even more and hired most of long-term temps permanently so they could stop paying double to different agencies.

      2. Uyulala*

        I think that is exactly what will happen. It’s like the foolish people who heard about the Affordable Care Act and thought “Oh, good. I work 32 hours a week so I will get benefits now.” Nope. That just means that your hours were just cut back to only 29 per week.

        1. Observer*

          That happened to some people, but a lot of others actually did wind up getting benefits. There is only so far companies can go in that direction before it winds up biting them in the rear.

          1. i'm anon*

            Yes, see the Dave & Buster’s lawsuit currently going on. Reducing hours in order to avoid paying benefits may be a violation of ERISA.

      3. Elizabeth West*

        That’s pretty much what I was thinking. “Do your work in the time allotted, and if you can’t, we’ll find someone who can.” Or part-time everything.

  13. Brett*

    I think it is worth nothing that the highly compensated employee threshold is probably going up too, from $100k to $122,148 with annual indexed increases. If you are above that threshold, then you can be declared exempt even if you are not primarily engaged in executive, administrative, and professional duties.
    Might not affect a lot of people, but will be really important for those effected.

  14. Allison Mary*

    So, I’d like to propose a question to other commenters.

    I have a full-time job offer for what WAS going to be an exempt position, paid at a base salary of around $46K per year (which is just under the proposed threshold of around $50K). However, my firm does something unusual in that they pay entry level, exempt employees a sort of “straight overtime” – for every hour over 40 hours I work in a week, I would get an additional $22.12 per hour, but if I work less than 40 hours, I’d still get the minimum base pay. My job doesn’t start until the fall, the first week of November 2016.

    What I WANT to do is email the firm’s recruiter now, and ask her how the firm would be likely to handle these changes if they become law as expected in July 2016. Would they be more likely to keep my salary where it is, thus classifying me as non-exempt? Or would they raise my salary to meet the threshold? And if they DO raise my salary, would they be likely to remove that “straight overtime” perk from my compensation?

    If you guys were in my shoes, would you ask these questions now? Or would you wait to ask these questions until the law has actually been changed?

      1. Allison Mary*

        Hmm… Unlikely. My base salary is close enough to the threshold that even in a worst-case scenario (they raise my base salary to ~$50K, but remove the “straight overtime” perks) we’re not talking about a huge change. With the $46K base salary plus expected straight-overtime, my total compensation would’ve been about ~$52K per year.

        I think I’m just very, very curious, because the best-case scenario (they raise my base salary AND keep the “straight overtime” provisions) could mean a substantial increase in my overall compensation, which of course I would love.

        So I’m guessing based on this, that you think it would make more sense to wait until the law is passed, to ask these questions. Which I suppose I agree with. Curiosity will have to wait.

        1. Ask a Manager* Post author

          Yep, if it won’t change your decision, I’d wait, especially since you’d be asking them to speculate without having the final rules yet.

      2. Allison Mary*

        Oh, and to clarify the whole picture, the original offer was made LAST fall, in October 2015. I accepted it at that point, so now I’m in this weird limbo state where I’m not working, and just waiting for my full-time job to start.

        1. Ms. Didymus*

          I’m just really curious. What kind of industry has jobs that you are offered 2 years prior to the start?

          1. Allison Mary*

            Entry level public accounting. And it’s not 2 years in advance, it’s just 1 year in advance. I was offered the job in November 2015, with a start date of late October/early November of 2016.

            1. De Minimis*

              Can confirm…they have a fixed recruiting season, they interview for full time people in the fall. Generally these people are in their senior year and will start work the following fall [though mine usually started people in July since that was the start of the fiscal year.]

              Sometimes they will also let people take a break before starting work to pass the CPA exam or at least try to get a few sections passed. I’ve also heard of them paying for grad school [if someone has an accounting undergrad degree they can generally get a master’s in accounting or taxation with only one additional year of schooling.] So conceivably, someone could have a job offer even more than a year in advance of the start.

    2. Mike C.*

      Speculation of course, but removing straight overtime doesn’t make any sense to me. They’re already choosing to pay you more than they absolutely half to (and it’s more than the proposed limit), and it’s likely they’re doing it to prevent burnout and properly account for hours worked as a resource. Not to mention the huge internal backlash they’d face from a lot of folks who wouldn’t even be affected by this change in the first place.

      Most likely they’ll simply up your minimum salary to comply with the law.

      1. Allison Mary*

        Fair point. I’m sure there are at least a few staff-level and certainly several senior-staff-level employees who are already above the threshold, and they would all be getting straight-overtime as well (it’s something they do for all staff and senior staff, who are on the bottom two levels of the totem pole in the hierarchy structure). Seems unlikely that they would remove the straight overtime for some people, and not for others.

  15. Not an IRS auditor*

    All I can say is I am really,REALLY happy that the bottom of the salary grade for the employee I’m hiring (my only employee) is a smidge over the new threshold. It would be such a pain to have track their hours.

  16. YaH*

    It is absolutely infuriating that teachers are not going to benefit from this. I’ve been in this field for ten years and still make significantly under 50K. Starting salaries are around 36K.

    1. Teacher teacher!*

      I’m a teacher too, it really is frustrating that school districts can demand x education and y certification but pay whatever the heck they want basically. Salaries start in my neck of the woods at low 30,000. But if we had a masters degree and numerous certifications and licenses in other industries, we’d be making closer to six figures.

      1. Elizabeth West*

        Oh teaching is like being an artist or writer–IT’S A CALLING NOT A JOOOOOOOOOOB. Like teachers only do it because they love it and it’s not really work. :P

        Every teacher I know does tons of overtime work just to keep up! So I agree.

    2. Callie*

      I only got above 50K after 10 years, but only because I had National Board certification and the state I was in at the time gave a 10K bonus. Then the recession hit, and they suddenly couldn’t afford it anymore. Such BS. “Do all this work and we’ll give you a bonus! oh wait, jk, you did the work but we don’t have the money anymore oh well too bad.”

  17. Nobody*

    I think this falls in the category of, “If it looks too good to be true, it probably is.” A lot of people are salivating over the huge raises or tons of overtime pay they’re going to get if/when this regulation goes into effect, but you have to remember that most companies aren’t very interested in suddenly increasing their labor costs. The money has to come from somewhere, and most companies are not going to want to sacrifice profits. Keep in mind that the companies that will have to change their ways are the ones that are already taking advantage of underpaid exempt employees.

    I suspect that this could affect people who don’t think they will be affected — those who are already non-exempt or already over the new threshold. Exempt employees who are already over the new threshold might have to pick up some of the duties (and work more unpaid overtime) from those below the new threshold, in order to keep the newly non-exempt employees at 40 hours per week.

    It is also possible that employers will recoup some of the higher labor costs by reducing benefits across the board. Maybe you’ll have to pay twice as much in health insurance premiums next year because the company will subsidize it less (or not at all). They might reduce PTO benefits, especially for non-exempt employees, because they’ll have to pay overtime for other employees to cover for those on vacation or sick leave.

  18. Employment Lawyer*

    -When you’re salaried, your wages don’t change with hours worked. So the marginal cost to the company of working another hour is ZERO, and the marginal income to you from working another hour is ZERO.

    Any company who starts paying you more(due to the salary cap) is going to start asking for more in return. You may not work weekends and you may not be asked to work from 8:30-6 right now, but you will be if they’re forced to give you a $10k raise. After all, you’ll have to compensate for the fact they they will cut hours for the other employees to avoid paying OT.

  19. Mimmy*

    This may be a silly question: At a previous job, I was paid more than the current threshold (by a few thousand dollars by the time I left in 2005) but was paid overtime when appropriate. I assume this was okay? I’m pretty sure I was non-exempt because of the OT and the fact that I was a data entry clerk.

    IOW: Can non-exempt employees still be paid over the threshold so long as they meet the duties test of being non-exempt?

    I know this was ages ago, but I’m weirdly curious if my employer did everything correctly. Plus, this stuff gets confusing, lol.

  20. Elizabeth West*

    I don’t think this will affect me at all. I’m hourly, I’ve always been hourly, and I rarely work overtime. When I do, I get paid for it. There’s no way my salary is going up to $50K.

    Off-topic; I don’t know what changed but I’m struggling with this redesign of comments where I put my name, etc. BELOW the comment and have to scroll down to click Submit. Ergh.

  21. Laura*

    Thanks for your post, Alison. I think I understand the proposed changes now, and I hope they go through. I make $33,500 and work overtime frequently. I live within my means and would have no problem tracking my hours/being limited to 40 hours. A fair workweek or overtime pay… either one sounds good!

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