More than 4 million workers will be eligible to earn overtime pay under new regulations set to be announced Wednesday by the Department of Labor, which is doubling the salary cap at which workers are exempt from overtime.
The new limit for salaried employees to earn overtime when working more than 40 hours a week will be $47,476 a year, up from $23,660.
The rule will take effect Dec. 1 and will be updated automatically every three years, indexed to salary growth.
The new regulations could lead to increased litigation around overtime, said John McKelway, a partner in the labor and employment group at the Boston office of McCarter & English. Companies can deal with the new regulations in several ways, he said. They can increase salaries to the weekly cap, eliminating the requirement to pay overtime but resulting in an economic hit to the company, or keep salaries the same and control the amount of overtime employees work.
A third option is converting salaried employees to hourly workers, calculating a rate that takes into account overtime hours a person normally works. This is the most straightforward approach, McKelway said, but means tracking and compensating for “off the clock” work that people do at home.
Converting salaried employees to hourly can also be a psychological blow for managers who work long hours at relatively low-paying jobs.
“One of the things that really allows them to keep going and feel good about themselves is the fact that they view themselves as a manager, and once they start technically punching a clock, they feel diminished,” he said. “Rightly or wrongly, it is a blow to the employee’s self esteem, and that affects their morale, and that affects their productivity.”