Salaried workers who earn nearly $1,000 per week would become eligible for overtime pay under a proposal President Barack Obama unveiled Monday evening, saying that too many Americans are working too many hours for less pay than they deserve.
The long-awaited overtime rule change, first reported by Politico, from the Labor Department would more than double the threshold at which employers can avoid paying overtime, from the current $455 a week 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, up from the current $23,660 a year.
"We've got to keep making sure hard work is rewarded," Obama wrote on The Huffington Post. "Right now, too many Americans are working long days for less pay than they deserve. That's partly because we've failed to update overtime regulations for years … ”
Obama's rule change aims to narrow a loophole that the president has long said some employers exploit to avoid paying overtime.
As it stands, employees who make above the salary threshold can be denied overtime if they are deemed managers. Some 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.
The proposed changes will be open for public comment and would most likely be completed in 2016 because, as a rule change which is akin to an executive order, it does not have to go through Congress.
The rule change involves updating labor standards set in 1938 under the Fair Labor Standards Act, which included a national minimum wage, and a provisions for time-and-a-half pay for certain salaried and hourly workers after they had put in a 40-hour week, according to Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities writing in the Washington Post.
The existing salary cap, established in 2004 under President George W. Bush, has been eroded by inflation and now puts a family of four making just above the cap into poverty territory. Obama has long charged that the level is too low and undercuts the intent of the overtime law.
Although the Labor Department's estimates suggest the proposal would raise wages for 5 million people, other estimates are far higher. The Economic Policy Institute, a liberal think tank, recently estimated that a threshold of $984 a week would cover 15 million people.
Under the current threshold, only about 8 percent of salaried workers are eligible for time-and-a-half pay when they work overtime. The EPI estimates that doubling the salary level would make up to 40 percent of salaried workers eligible.
Randy Johnson, a vice president at the U.S. Chamber of Commerce, said Monday that making more employees eligible for overtime will lead to a drop in the number of full-time jobs and that some workers would lose benefits and opportunities for promotions.
“This change is another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact,” Johnson said in a statement.
But supporters of the proposal, including Judith Conti at the National Employment Law Project, say overtime pay protections were created not to increase workers' pay but to promote the 40-hour workweek.
“Some people will work fewer hours for the same money and have more control over their lives, some will work the same hours for more money,” Conti said.
Al Jazeera with wire services