The Final Rule: How it Impacts YOU


If you’re like me, most of the regulations churned out by the slow, grinding wheel of the Federal government get overlooked for two reasons. First, they have no immediate impact on my current well-being; and second, they do not hold the national spotlight in social and news media outlets. Every once in awhile, a federal regulation produces sweeping social and economic consequences (e.g., Title IX or The Affordable Care Act). One such regulation will affect an estimated 4.2 million American workers, will create widespread economic impacts and will be enacted on December 1, 2016. Do I have your attention now?

The Final Rule will affect an estimated 4.2 million American workers, will create widespread economic impacts, and will be enacted on December 1, 2016.

The Final Rule

These new federal regulations are dubbed the “Final Rule” and are a full-scale overhaul of regulations governing compensation for salaried employees working over 40 hours a week. The last time this salary threshold was adjusted was 2004. Twelve years is a long time to wait for financial inflation and wage adjustment. As with any other regulations, those who qualify under the new guidelines face requirements and restrictions. You may be thinking, “Do I qualify?” According to an overview of the guidelines provided by the Department of Labor, if you are a salaried, full-time employee making up to $47,476.00 per year, you are due compensation for working more than 40 hours in a week. This is not the only requirement; differences exist between non-profit and for-profit organizations, and employees face exemptions such as commission-based pay, bonuses and other compensation for pay.

If you’re not excited about the Final Rule, you should be. Gone are the days of corporations overworking employees without necessary compensation simply because they are paid salaries instead of hourly wages. As a Millennial, I respect the hard working, never-quit attitude of previous generations. I also wonder about the social and financial ramifications of expecting people to work extended hours (more than 40 hours per week) with no compensation simply because they are salaried employees. This is common for recent college graduates and those new to their career fields. At my current job, for example, I work 45 to 50 hours a week in a salary range that falls under the threshold proposed by the Final Rule. I am not required to work these additional hours, but I need to, to keep up with the workload. If that sounds familiar, prepare yourself. As of December 1, 2016, employers will have to make some major adjustments to the way they currently handle things like overtime and employee workload.

What Will Your Employer Do?

The Final Rule sounds great for the employee, but let’s talk about the ramifications for the employer. To meet these new compensation requirements, employers have four options:

  1. Pay the employee the standard time-and-a-half overtime pay due to an employee working more than 40 hours a week
  2. Raise an employee’s annual salary over the regulated threshold of $47,476.00
  3. Limit the employee to working a maximum of 40 hours per week
  4. Use a combination of these solutions

The first solution requires a potentially significant financial expenditure on the part of the employer, and we all know that major corporations are not big fans of shelling out additional money if it has a significant impact on the bottom line. The second solution could actually save those same corporations some money for employees who are already close to the salary threshold. Raising their salaries to be above the threshold could actually cost the company less than paying them overtime pay.

The third solution—limiting an employee’s work hours to 40 hours per week—could have adverse consequences for the company. If the company requires those extra hours to run effectively, taking them away would lead to a decrease in overall production, ultimately affecting the company’s bottom line. Proponents of these new regulations say this will require the companies to create more jobs to compensate for the loss of work that would normally be completed during overtime hours. However, it could also lead to companies placing more pressure on their current employees to produce the same amount of work in less time, to avoid paying out additional compensation or hiring more employees.

What Does All This Mean?

By now, you are probably wondering how your job will be affected by the new federal regulations. Take heart. These regulations are meant to protect employees by ensuring they are fairly compensated for overtime hours. If your employer decides to pay time-and-a half, congratulations on the additional pay. If your employer increases your pay to exceed the new threshold, you just got a raise. If your employer caps your time spent in the office at 40 hours of work per week, just think of what you can do with those extra hours outside of work each week. Take some time and check out the new regulations for yourself, now that you know they exist.