New overtime rules that take effect Monday could mean more pay for more workers and more costs to employers.
The new federal regulations will qualify hundreds of thousands of lower-paid employees for overtime benefits, while taking away overtime from highly compensated workers, or those earning more than $100,000 a year.
According to the U.S. Labor Department, the changes will cost U.S. businesses $1 billion this year in added payroll costs and consultation fees.
One of the most significant changes is the threshold used in qualifying workers for overtime pay.
Under the new regulations, workers are automatically eligible for overtime pay if they earn less than $455 per week ($23,660 per year). Previously, the minimum weekly salary threshold was $155 per week ($8,060 per year).
David Williams, an attorney specializing in labor and employment law at Snell & Wilmer's Salt Lake office, said more people will be eligible for overtime under the new rules.
In fact, roughly 1.3 million additional salaried white collar workers will be entitled to overtime pay under the new rules, according to government projections. And workers will gain up to $375 million in additional earnings each year.
"Unfortunately, a lot of organizations don't know it's going into effect," Williams said. "I think there are several companies out there that either think the regulations don't apply to them or figure it's not that big of a deal."
Federal regulations require overtime pay at a rate of not less than 1 1/2 times an employee's regular rate of pay after 40 hours of work in a workweek.
Failure to pay overtime to qualified workers can result in back wages, penalties and costly lawsuits.
"In many cases, all it takes is one employee phone call to the (Labor Department) with an overtime complaint to start an investigation of a company's entire classification process," Ashley Kaplan, an employment-law attorney with Florida-based G. Neil Corp., said in a prepared statement. "Employers who do not thoroughly assess their procedures will run some serious and potentially expensive risks."
Those ineligible for overtime pay include executive, administrative and professional employees, outside sales people and computer specialists.
Manual laborers — such as carpenters, electricians and plumbers — and first responders — including police officers, park rangers, paramedics and firefighters — will continue to be eligible for overtime.
Critics of the new regulations argue that the right to overtime pay could be stripped away for more than 6 million workers.
"The regulatory changes issued by the Bush administration would make drastic changes," Ross Eisenbrey, vice president of the Economic Policy Institute in Washington, D.C., said in a prepared statement, "vastly increasing the number of exempt employees and making it likely that millions of them will work longer hours at reduced pay."
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