In an effort to boost stagnant wages and honor his promise to ensure a fair wage for all, on May 18th, 2016 the Obama administration, through the U.S. Department of Labor, announced an updated overtime rule that more than doubles the overtime pay threshold of $23,660 a year ($455 a week), to $47,476 a year ($913 a week). Barring any successful legal challenge (mainly by the Republicans in Congress), the new rule takes effect on December 1, 2016 and it does not necessarily stop there. The rule permits additional automatic increases to the threshold amount every three years.

What this means is that any salaried employee making less than $913 a week (instead of less than $455 a week) is now eligible for overtime pay if that employee actually works more than 40 hours in a workweek. The rule is designed to compensate lower level salaried employees who work long hours and perform some managerial duties and were otherwise deemed exempt from overtime pay under the Fair Labor Standards Act.

Business groups and employer associations oppose the rule, believing that it will affect the bottom line and force employers to cut hours to ensure no one works in excess of 40 in a workweek, cause employers to hire more part-time workers rather than full time workers (again in an effort to avoid anyone working over 40 hours in a workweek), and/or force employers to lower hourly wages to offset any overtime pay required. It may also cause a reduction and/or elimination in employer-provided benefits, and any discretionary bonuses that were once provided. However, taking such steps will clearly affect employee morale, and that could be even worse for the bottom line.

Advocates for the rule change claim that it will result in higher pay for workers (since more employees may increase salaries above $913 a week to avoid the new threshold), and/or it will result in more free time with friends or family (since employers will cut hours to try to avoid paying overtime).