Update: On Nov. 22, 2016, a federal court blocked the overtime expansion pay rule. Click here to read more.
NASHVILLE, Tenn. (WKRN) – More than 4 million U.S. workers will become newly eligible for overtime pay thanks to a Federal rule that goes into effect on Dec. 1.
The new Fair Labor Standards Act will be a boost to some worker’s wallets while others will keep the same pay but work fewer hours.
The new rule would make time-and-a-half mandatory for anyone earning less than $47,476 a year.
It would more than double the salary threshold under which employers must pay overtime to their white collar workers. Overtime protections would apply to workers who make up to $913 a week, or $47,476 a year, and the threshold would readjust every three years to reflect changes in average wages.
Based on projections, it is expected to rise to $51,000 by Jan. 1, 2020, after the first update.
The Department of Labor estimates that nationally 4.9 million workers will receive the overtime protection.
The industries most affected by the new Fair Labor Standards Act rule will likely be retail and hospitality.
The overtime threshold was last updated in 2004 and now covers just 7 percent of full-time salaried workers, administration officials said – down from 62 percent in 1975.
The higher threshold will lift that ratio back to 35 percent, Labor Secretary Tom Perez said. Perez has spearheaded the administration’s effort and has worked on formulating the rule for the past two years.
The new rule is intended to boost earnings for middle- and lower-income workers, Perez said, which have been stagnant since the late 1990s. Overtime pay hasn’t received as much attention as nationwide efforts to increase the minimum wage, but it could have a broad impact.
As many as 21 states are fighting the rule because of the time-frame for implementation.
“The overtime rule is designed to restore the intent of the Fair Labor Standards Act, the crown jewel of worker protections in the United States,” Perez said in a statement. “I look forward to vigorously defending our efforts to give more hardworking people a meaningful chance to get by.”
The measure would shrink the so-called “white collar exemption” that exempts workers who perform “executive, administrative or professional” duties from overtime and minimum wage requirements.
“This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” the Labor Department said in May when it announced the new rule.
The liberal Economic Policy Institute estimates that 4.9 million people will become newly eligible for overtime, slightly more than the government’s figure, and that an additional 7.6 million will benefit because they have previously been denied overtime pay as white collar workers. Yet with salaries below the new threshold, they will now have a stronger claim to overtime pay.
Overtime has become a sore point for many managers, assistant managers, and management trainees in the fast food and retail industries.
Despite their titles, they have complained in lawsuits against such chains as Chipotle and Dollar General that they spend most of 50- or 60-hour workweeks staffing cash registers, mopping floors, or performing other tasks typical of regular employees. Yet they don’t get paid time and a half when they clock more than 40 hours in a week.
The retail federation warns that many of the affected workers will have their hours reduced to below 40 hours a week. Others might receive overtime pay but would have their base wages reduced so their overall income would remain the same.
*The Associated Press contributed to this report.