The Fair Labor Standards Act was passed way back in 1938. It was a way of establishing a minimum wage that would make sure that companies were not exploiting their workers that had nowhere else to turn. This act is updated on occasion to satisfy changes in the economic environment. For instance, in 2009 the act was updated to set the minimum wage at $7.25 per hour. The act may be again changing this June.
The current parts of the act that regard overtime were established over a decade ago in 2004. The overtime laws stated that anyone making under $23,660 per year (assuming they work 40 hours per week), you must pay them overtime pay (time and a half) if they go over 40 hours. There are a number of exclusions of course, for instance salaried workers can be expected to work overtime without additional compensation.
This law may soon be changing. There is a push to get that cap raised to $42,000, as well as provide other tiered levels over and above it.
This means that business owners that were once exempt from the overtime pay laws, but still pay their employees under $42,000, may now have to start paying extra for overtime hours that their employees work.
It also means that many businesses may need to scramble and restructure the way that they pay their employees. For instance, if a business owner is paying her assistant $40,000 per year, but requires a lot of extra hours around the holiday season, it would probably be beneficial to simply bump the pay up $2,000 rather than deal with overtime.
For business owners that pay around $24,000 per year, it would probably be beneficial to cap hours so that there is no likelihood of going over 40 each week. For employees, that may mean they see a reduction in the number of hours that they work in order to make sure that they are not even approaching the 40 mark.
Will it Affect You?
If you are a business owner, and you have employees, this new structure may very well affect you and your bottom line. Employees are getting more and more expensive, and if these new laws go through, they may become quite a bit more expensive. Your best bet is to know how overtime laws may be changing, and when the act has been finalized, speak with your accountant to know how it is going to affect your business.