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How Raising the Overtime Salary Threshold Could Affect Kentucky

Ervins Strauhmanis/Creative Commons

An estimated additional 70,000 Kentuckians would be eligible to receive overtime pay if a new U.S. Department of Labor rule goes into effect.

President Obama this week proposed a rule that would raise the salary threshold for those who can receive overtime from $455 per week to $970 per week. The Department of Labor estimates that if implemented, 4.7 million workers would become eligible for overtime pay if they work more than 40 hours per week.

Kentucky Center for Economic Policy director Jason Bailey said the rule also means employees are less likely to be pressured to work more than 40 hours per week.

“When folks are working beyond that it really strains their ability to take care of family, take care of children, participate in their community, have some rest,” Bailey said.

Employers are required to pay many employees 150 percent of their hourly pay for every hour worked over 40 in a week.

The salary threshold for overtime pay was last raised in 2004 during the Bush administration. Before that the threshold had been set by the Ford administration at $250 per week, the 1975 equivalent of $970 when accounted for inflation.

Bryan Sunderland, vice president of the Kentucky Chamber of Commerce, said the rule “may have unfortunate consequences for the very employees the rule purports to help.”

“It is hard not to immediately notice a loss of flexibility and wonder how this may impact employees’ opportunities for advancement,” Sunderland said.

Bluegrass Institute President Jim Waters said that small business owners would be negatively impacted by the rule, leading to higher prices for consumers.

"The money has to come from somewhere," Waters said.

"Many employers will adjust, they’ll cut base wages, they’ll cut benefits they won’t hire as many people, they’ll lay people off."

The Department of Labor is currently holding a comment period for the proposed rule.

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