WASHINGTON – Here’s a convenient way of getting more work out of your employees without paying the required time-and-a-half pay for anything more than 40 hours a week: Call them managers.
Currently, these so-called white collar workers are exempt from overtime if they make more than $455 a week or $23,660 per year, even if they perform routine tasks such as stocking shelves at a convenience store. In fact, those small-time bosses don’t even have to be paid anything more for the extra hours they put in to get the job done, not even minimum wage.
Monday night, President Barack Obama announced that he wants to double that threshold, to $50,440 per year. The move would expand the number of people eligible for overtime from about 8 percent of the salaried workforce to about 40 percent, covering 5 million more workers, according to a fact sheet from the Department of Labor.
“That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve – since those who are doing right by their employees are undercut by competitors who aren’t,” Obama wrote in a Huffington Post op-ed announcing the decision.
Obama declared his intention to tweak the overtime exemption back in March 2014, pointing out that the threshold for eligibility had fallen far behind inflation since it was initially set in 1975. Then, the rule meant that about 62 percent of salaried workers were eligible for overtime.
Over the past few months, progressives feared that he wouldn’t raise the threshold high enough to make a real difference, and they pushed back. In December, the left-leaning Employment Policy Institute (EPI) – whose former staffer Heidi Shierholz is now chief economist at the Department of Labor – reported a “rumored” benchmark of $42,000 a year, and it put together a letter from economists arguing for something no less than $50,000. Polling found that a larger majority of Americans favored allowing more people to earn overtime. Advocacy groups supported a stronger rule, and The New York Times editorialized to the same effect.
The number on which the White House settled, $970 per week, is the same as what EPI recommended – because that’s what it would have been if the 1975 standard had kept up with inflation in the first place. Going forward, the proposed rule would index the overtime threshold to incomes, rather than inflation. That would allow it to rise with the economy, although it might not necessarily keep up with the price of living.
Obama, who has implemented a number of his most consequential workplace policies through executive order, doesn’t need congressional approval to pass the new overtime rule. However, it will have to go through a public-comment period, and employers will have lots to say. They’ve already weighed in strongly, both publicly and via lobbyists, with House Republicans holding a whole hearing earlier this month to bash the idea.
In particular, as a White Castle executive testified, the restaurant industry opposes increasing the amount of time an employee must spend on actual managerial duties – rather than, say, taking orders or wiping tables – in order to qualify as exempt from overtime. (The White House ended up not making that particular change in its proposal.)
