Obama Calls for Broader Overtime Coverage

WASHINGTON (AP) —

They’re called managers, and they sometimes work grueling schedules at fast-food chains and retail stores. But with no overtime eligibility, their pay may be lower per hour than many workers they supervise.

With those employees in mind, the Obama administration is proposing making up to 5 million more people eligible for overtime – its latest effort to boost pay for lower-income workers. These workers would benefit from rules requiring businesses to pay eligible employees 1 1/2 times their regular pay for any work beyond 40 hours a week.

“We’ve got to keep making sure hard work is rewarded,” President Barack Obama wrote in an op-ed published Monday in The Huffington Post. “That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay.”

Employers can now often get around the rules: Any salaried employee who’s paid more than $455 a week – or $23,660 a year – can be called a “manager,” given limited supervisory duties and made ineligible for overtime.

Yet that would put a family of four in poverty. Obama says that the level is too low and undercuts the intent of the overtime law. The threshold was last updated in 2004 and has been eroded by inflation. In 1975, overtime rules covered 65 percent of salaried workers. Today, it’s just 8 percent, the White House says.

The long-awaited overtime rule from the Labor Department would more than double the threshold at which employers can avoid paying overtime, to $970 a week by next year. That would mean salaried employees earning less than $50,440 a year would be assured overtime if they work more than 40 hours per week.

Labor Secretary Tom Perez said Tuesday that the change would add $1.2 billion to $1.3 billion in wages for many newly overtime-eligible workers. Others, Perez said, will benefit from employers reducing their hours. At the same time, he said, some employers may choose to hire new full-time or part-time workers to conduct the work salaried workers had once performed.

To keep up with future inflation and wage growth, the proposal will peg the salary threshold at the 40th percentile of income. The White House said 56 percent of those who would benefit in the first year are women, and 53 percent have a college degree.

The White House’s proposed changes will be open for public comment and finalized sometime next year.

They set up a populist economic argument that Democrats have already been embracing in the run-up to the 2016 presidential election. Vermont Sen. Bernie Sanders, who is challenging Hillary Rodham Clinton for the Democratic nomination, said the proposal means businesses would no longer be able to shirk their responsibility to pay fair wages.

“This long overdue change in overtime rules is a step in the right direction and good news for workers,” Sanders said.

The proposed changes will face opposition from the business community and many Republicans, who argue that they discourage hiring.

“Our research shows that … few workers would actually see more take-home pay,” David French, a senior vice president at the National Retail Federation, said. “There simply isn’t any magic pot of money that lets employers pay more just because the government says so.”

The NRF says its members would probably respond by converting many salaried workers to hourly status, which could cost them benefits such as paid vacation. Other salaried workers would have their hours cut and wouldn’t receive higher pay, the group says.

 

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