The Economy: New rule will extend overtime to millions
COLUMBUS, OHIO >> More than 4 million U.S. workers will become newly eligible for overtime pay under rules issued Wednesday by the Obama administration.
The rule seeks to bolster overtime protections that have been eroded in recent decades by inflation. A diminishing proportion of workers have benefited from overtime regulations, which date to the 1930s and require employers to pay 1½ times a worker's wage for work that exceeds 40 hours a week.
Vice President Joe Biden announced the changes at Jeni's Splendid Ice Creams in Columbus, Ohio.
In the fast food and retail industries in particular, many employees are deemed managers, work long hours but are paid a flat salary that barely exceeds the income of the hourly workers they supervise who receive overtime pay.
Under the new rules, released in draft form last summer, the annual salary threshold at which companies can deny overtime pay will be doubled from $23,660 to nearly $47,500. That would make 4.2 million more salaried workers eligible for overtime pay. Hourly workers would continue to be mostly guaranteed overtime.
Raise in pay expected
The White House estimates that the rule change will raise pay by $1.2 billion a year over the next decade. Some employers, though, might choose to reduce their employees' additional hours to avoid paying overtime, thereby making the workers' schedules more consistent.
"Either way, the worker wins," said Vice President Joe Biden on a conference call with reporters Tuesday.
Business groups, however, argued that the changes will increase paperwork and scheduling burdens for small companies and force many businesses to convert salaried workers to hourly ones to more closely track working time. Many employees will see that as a step down, they said.
"With the stroke of a pen, the Labor Department is demoting millions of workers," David French, a senior vice president for the National Retail Federation, said. "Most of the people impacted by this change will not see any additional pay."
The overtime threshold was last updated in 2004 and now covers just 7 percent of full-time salaried workers, administration officials said — down from 62 percent in 1975.
The higher threshold, to take effect Dec. 1, will lift that ratio back to 35 percent, Labor Secretary Tom Perez said. Perez has spearheaded the administration's effort and has worked on formulating the rule for the past two years.
The new rule is intended to boost earnings for middle- and lower-income workers, Perez said, which have been stagnant since the late 1990s. Overtime pay hasn't received as much attention as nationwide efforts to increase the minimum wage, but it could have a broad impact.
"This, in essence, is a minimum wage increase for the middle class," Judy Conti, federal advocacy coordinator for the National Employment Law Project, an advocacy group, said.