Overtime Pay Changes May Soon Affect Small Businesses

Date: May 07, 2015

A policy change in the works could put the squeeze on some companies.

Small business owners could see increased payroll costs in the near future as President Obama’s plan to change the salary threshold for employees who qualify for overtime pay nears a final ruling. The move could affect millions of workers, according to CNN.

As CBS News reports, the Department of Labor sent on Tuesday a proposal to the Office of Management and Budget. According to the article, the current law says “employers are required to pay time-and-a-half wages to employees working more than 40 hours a week only if they earn less than $23,660 annually. The Obama administration is intent on increasing—and likely more than doubling—that salary threshold, according to people briefed on the administration’s plans.”

The next steps will be an interagency review, the results of which are expected to be released in late May or June. A public comment period will follow before the final rule is adopted. 

The threshold is expected to increase to somewhere between $42,000 and $52,000, CNN reports. Part of the current law, which is tied to the 1938 Fair Labor Standards Act, includes many exceptions for white collar workers, according to The Dallas Morning News. It’s also expected that the ruling will have a significant impact on the retail and food industry. 

Jack Mozloom, NFIB’s media and communications director, told CBS: “Our members oppose it strongly mainly because it’s another arbitrary way for the government to increase their labor costs.”

The 1938 Fair Labor Standards Act has been revised over the years. CBS reports that the law “allows companies to designate someone making $25,000 a manager and thus avoid paying overtime, even if he or she works more than 40 hours a week. Certain professions like teachers are exempt.”

“It is absolutely not the government’s role to define who is and who is not a manager in the economy. That’s for businesses to decide themselves,” Mozloom told CBS.

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