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The income threshold for overtime: What is it for salaried employees?

As president, Harry S. Truman famously asked for a one-handed economist. The desire for clearer counsel is certainly understandable, given how often economists give conflicting counsel.

And it certainly isn't only presidents who are affected by this uncertainty.

In this post, we will discuss economic debates about how raising the income threshold for overtime pay may hurt or help workers.

Labor Department rules

Under current law, if you make more than $23,660 per year as a salaried employee, you may be exempt from the requirement that your employer pay time-and-a-half for hours worked over the 40-hour mark in a week.

But many employers improperly classify employees as exempt in order to avoid paying overtime. This often happens with employees such as managers or assistant managers at fast food places or convenience stores. It can also happen in offices and in other settings.

The Obama administration has therefore been trying to respond to the concern that the exception to overtime pay for salaried workers is used too often. For over two years, the Department of Labor (DOL) has been working on revising the rules on overtime for white-collar employees. President Obama signed an executive order on March 13, 2014, directing DOL to do this.

DOL is readying a rule that would raise the income threshold at which employees are generally exempt from the time-and-a-half requirement for work over 40 hours in a week. The proposal is to raise the amount from $23,660 to $50,440.

All things being equal, this would mean many more employees would be considered hourly, not salaried, employees.

Objections to the proposal

How employers would actually respond to such a rule is a matter of considerable debate.

One possible scenario is that many workers who previously didn't get overtime will now get it. In other words, it would be a de facto pay raise for those workers.

A second possible scenario is that instead of paying overtime to existing workers, companies would hire more workers. Or there could be some combination of these two scenarios, with some new hiring and some increases in worker pay because of increased overtime.

There are, however, critics who contend it is possible that many employers may actually cut pay in response to new overtime rules. Companies could respond by reclassifying many formerly salaried workers as hourly workers while cutting their base pay.

In short, there is considerable controversy about the effect that new overtime rules are likely to have in the marketplace. As Truman noted, one-handed economists are not easy to find.

Your job classification and your rights

Clearly, however, there is plenty of reason to be concern about the possibility that you have been wrongly denied overtime pay. Your job may not be classified properly or there may be other problems in play that have denied you proper pay.

It therefore makes sense to talk with a knowledgeable employment law attorney about your specific situation.

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