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Obama just changed the overtime laws. Can my employer change me from salaried to hourly?


You may have heard that President Obama just issued a new rule that will raise the minimum salary threshold for overtime pay from $23,660 ($455 / week) to $47,760 ($913 / week).

This is long overdue.  This threshold was largely meaningless in today’s economy and hadn’t had a meaningful change since 1975.  That threshold in today’s dollars is around $50,000.  With this change, workers who made less than $913 per week are automatically entitled to overtime pay, even if they satisfy the other elements of an exemption.  This does not mean that you aren’t entitled to overtime if you make more than $913 per week.  It may be, for example that you primary duty isn’t management or administrative work.

It’s just that you automatically get overtime if you make less than this amount.  By the way, it used to be that if you made at least $100,000 per year, you were automatically exempt.  That threshold has been increased to $134,004.

The big question is what will employers do with their employees who make less than $913 / week and are presently classified as exempt.  They could convert these workers to an hourly rate, ensure that they don’t work more than 40 hours per week or give them a raise.

My guess is that most of these workers will become hourly.  This may feel like a demotion to some but it really shouldn’t be looked at this way.  We’ve forced many companies to convert salaried workers to hourly over the years and almost always get positive feedback after the change.  Usually, they are happy that they don’t have to work such long hours (for free) and can go home at a reasonable hour and spend more time with the family.  This is not illegal and in fact should be embraced.  Usually, the new hourly rate will be 1/40th of your previous salary.

Some have asked, “ if I am entitled to overtime why wasn’t I paid before?”  This is a good question.  In fact, it could be that you are entitled to 2 or 3 years’ worth of back pay.  Even though the new salary threshold is not retroactive, it could be that you had been misclassified for another reason, for example if you were doing mostly hourly work and only managing a small percentage of the time.

In any event, this change has been long overdue and should be good for workers and the economy.

Contact The Hayber, McKenna & Dinsmore with any questions!