As you may have heard, the Obama administration announced new rules this past week that will make millions of salaried workers eligible for overtime:
Under the new regulation to be issued by the Labor Department on Wednesday, most salaried workers earning up to $47,476 a year must receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660.
For anyone interested, you can check out all the details of the new rules on the DOL website. It goes into effect on December 1.
The new rules shouldn't affect most accounting firms. Firms located in any major urban areas, especially, should be offering starting salaries in excess of the threshold. According to Payscale.com, the median salary for a CPA is around $61k, so while lots of young accountants start below that, those salaries should be in excess of $47k.
But in some pockets of the country, it's possible that some entry level people are drawing salaries that fall below the new threshold. This was on the mind of one reader who wrote in:
I am wondering if you can delve into the effect that the new Overtime Pay Rule will have on small public accounting firms and the public accounting profession in general.
I'm currently finishing up an internship at a local/small regional firm, and I am having lunch with one of the partners tomorrow where I'm expecting an offer letter (another intern had a similar lunch). Once I saw the new rule, I laughed to myself and thought, "Well, I guess my offer is going to be at least $47,476!"
I'm just wondering if you had any input or thoughts about the matter.
My first thought is that yes, you can probably expect a salary above $47,476. My second thought was that any CPA working at a firm who is earning below threshold can expect a raise between now and December 1st. And my third thought was the new rules will mostly affect CPA firms' clients and that's been reflected in some of the coverage.
The other thing the new rules got me thinking about was the overtime lawsuits that have been waged out in the courts, most notably Campbell v. PricewaterhouseCoopers and Pippins v. KPMG. These two cases were filed in California and New York respectively but one of the key issues in each was the status of unlicensed associates. That is, are unlicensed accountants working in CPAs even eligible for overtime because of the nature of their work? The 9th Circuit Court of Appeals ruled in Campbell that unlicensed accountants could be eligible for overtime under California law. The 2nd Circuit Court of Appeals came to a different conclusion in the context of the Fair Labor Standards Act. I confess that I have a pretty limited knowledge of labor law but what I do know is: 1) It's extraordinarily complicated and 2) The spirit of the law and what actually happens in practice are two very different things, especially as it relates to accounting firms.
Sorry for the little tangent there, the new OT thresholds are a little more straightforward. Any small town CPAs out there under the threshold? Are you expecting a bump up to $48k? Whose clients are already freaking out over this? Let's discuss.