President Barack Obama has used his executive powers to order changes in the federal rules governing overtime pay for salaried workers. The changes in Labor Department regulations could lead to bigger paychecks for millions of salaried American workers.
The regulations, which have yet to be written (and won't take effect until at least 2015), would likely raise the salary threshold of workers who are eligible to receive overtime. They might also tighten the definition of supervisory workers who can be excluded from overtime payments.
As he signed the order, the president said, "Overtime is a pretty simple idea. If you have to work more, you should get paid more. Unfortunately today, millions of Americans aren't getting the extra pay they deserve."
Negative reaction to the plan was immediate, with Congressional Republicans accusing the president of once again taking unilateral action, and business leaders denouncing the proposal as a job-killer.
Exempt from Overtime
Hourly workers in non-management jobs are required by federal law to be paid time-and-half for hours worked beyond the 40-hour work week. An exemption excludes workers who spend as little as 5 percent of their work hours on supervisory tasks.
Through job title inflation that redefines their work as "executive, administrative or professional," many low-paid workers, such as convenience store managers, fast-food store shift supervisors and computer technicians, no longer get paid for working longer hours.
In fact, one White House official said, they may not even be making the minimum wage when their unpaid hours are taken into account.
Current Labor Department regulations require that salaried employees making less than $455 per week be paid overtime. At that level, even some workers whose incomes fall below the federal poverty level of $23,660 are not eligible for overtime pay.
Administration officials, speaking off the record, told The Washington Post that the limit could be raised significantly, to somewhere between $550 and $970. That would make about 10 million Americans newly eligible to receive overtime pay.
The salary threshold was last raised 10 years ago by President George W. Bush.
Betsey Stevenson, a member of the White House Council of Economic Advisers, told reporters at the White House on Wednesday that 3.1 million additional Americans would be eligible for overtime pay if the limit had been allowed to increase at the inflation rate.
"It's about time we addressed the unfair overtime laws in this country," said AOL Jobs resident employment advocate Donna Ballman. "Right now, the exemptions have so many loopholes that people making below the poverty level can be considered salaried exempt. The threshold of $455/week is outdated. Plus, the exemptions are so confusing that employers frequently get them wrong. If someone is making $25,000/year, they ought to get overtime for hours worked over 40 per week. Period."
A Job-Killing Effect?
House Speaker John Boehner, a Republican, criticized the president's proposed rule. "The president's policies are making it difficult for employers to expand employment. And until the president's policies get out of the way, employers are going to continue to sit on their hands," he told The Washington Post.
Business groups also were swift to react.
"Similar to minimum wage, these changes in overtime rules will fall most harshly on small and medium sized businesses, who are already trying to figure out the impact of Obamacare on them," Marc Freedman, executive director of Labor Law Policy for the U.S. Chamber of Commerce, told The Associated Press.
And the National Retail Federation put out a statement saying that the expansion of overtime pay "would have a significant job-killing effect."
But Cecilia Munoz, director of the White House Domestic Policy Council, told The New York Times, "We need to fix the system so folks working hard are getting compensated fairly."
The details are not expected to be released until later in 2014, and would not go into effect before 2015.
The president is already getting heat from Congress over another unilateral move, his executive order requiring that federal contractors pay a minimum wage of $10.10 an hour.
Obama also is pressuring Congress to raise the minimum wage for American workers to $10.10 per hour, from $7.25. That proposal is given little to no chance of passage by the current Congress.