Connecticut employers are bracing for a new federal rule taking effect later this year that will entitle more workers to overtime pay.
The U.S. Department of Labor has finalized a rule that raises the salary threshold at which workers are exempt from overtime pay. Currently, those earning $23,660 or more are exempt from overtime pay, but that threshold will more than double to $47,476 on Dec. 1.
The federal government estimates 4.2 million white-collar employees nationwide – executive, administrative and professional workers – whose salaries fall under the new cap could be eligible to receive overtime pay if they work more than 40 hours in a week.
Under the rule, which applies to businesses of all sizes, the salary threshold will be updated every three years and is projected to rise to $51,000 on Jan. 1, 2020.
In Connecticut, employers that typically have lower-wage workers – in the fast food, hospitality, home health care and nonprofit industries – likely will be the most impacted, said Mark Soycher, counsel for human resources services at the Connecticut Business & Industry Association.
“They are facing some struggles with this,” he said, particularly because the threshold increase is so large.
Considering the threshold hasn’t been changed since 2004, Soycher said, many employers feel the increase is “just too far, too fast” even though they support the idea of giving more workers overtime pay.
Many Connecticut businesses that will be affected by the change also are impacted by the state’s rising minimum wage, he noted. The state minimum wage is slated to rise to $10.10 on Jan. 1, 2017.
Employers have four ways they can deal with the new rule, according to the U.S. Department of Labor: they can start paying overtime, raise employees’ salaries to the new threshold to avoid paying overtime, instruct employees not to work more than 40 hours a week, or cut employees’ base pay to offset new overtime payments.
In Connecticut, the state Department of Labor’s Wage and Workplace Standards Division has been directing employers to the federal department’s website and fact sheets to ensure they understand the changes in the pipeline, said state DOL spokeswoman Nancy Steffens.
CBIA also has been making sure employers know about the change and discussing possible strategies for handling it, Soycher said.
Businesses in the state may feel the pinch a bit less than those in other states, he added, because Connecticut already is a relatively high-wage state due to its high cost of living.
“It diminished, a bit, the impact on the economy in Connecticut, although there are still restaurants, fast-food places, home health care providers, nonprofits and other industries with traditional lower-wage employees that are feeling the pinch,” he said.