A new rule scheduled to being finalized by the Labor Department on Wednesday has been called one of the most ambitious economic reforms of the Obama era, and will ensure that millions of American workers will soon receive protections enabling them to receive pay for overtime worked.
The Obama administration will accomplish this mission by raising what is known as the overtime salary threshold, which is currently set at $23,660. Nearly every worker who earns a salary beneath that threshold is entitled to time-and-a-half pay if they happen to work more than 40 hours a week. However, the new rule states that the threshold will now be moved which means that anyone who makes less than $47,476 per year must be paid time-and-a-half if they work beyond 40 hours a week. The new salary threshold more than doubles the old one.
The media house NPR has called the Labor Department’s rule a part of one of the “sweeping moves” that Obama has made in the administration’s efforts to combat the slow growth of incomes, and is one that some small business owners will surely give a lot of opposition.
The White House anticipates that the higher salary threshold will bring overtime rights to 4.2 million salaried workers who do not currently qualify. The Labor Department also believes that another 8.9 million workers who are technically already eligible for overtime benefits but are not receiving it will be fully protected under the new rules.
Labor Secretary Tom Perez spoke to the press and said that the reform will be addressing the current atmosphere of “both underpay and overwork.”
“Our whole mission here is about strengthening and growing the middle class. In order to do that, we need to ensure that middle class jobs pay middle class wages. Some will see more money in their pockets … Some will get more time with their family … and everybody will receive clarity on where they stand, so that they can stand up for their rights.”
Capitol Hill currently has a blockage placed on hiking minimum wage, and as such, the most aggressive and long-lasting method that the Obama administration could assist workers in the private-sector industry with a wage increase was to expand overtime pay. The reforms that the White House is making is authorized under the New Deal-era legislation known as the Fair Labor Standards Act. This means that Obama does not need congressional approval to implement these changes, though it is expected that Republicans will still try to block the reforms by means of the appropriations process.
The Huffington Post was the first to know of Obama’s overtime plan since he first laid them out in a blog post for them last year. America’s overtime law was initially passed during the Great Depression and was meant to prevent employers from working their employees too long and paying them too little. The law guaranteed that workers got paid extra as long as they worked extra, and employers were less likely to do this since it would cost them so much, paying at a time-and-a-half premium. Under the George W. Bush administration, the protection eroded due to inflation and regulatory changes, and only about 7 percent of salaried workers now receive time and a half for working extra hours.
The current regulations sees many working-class employees who earn above the salary threshold as classifying as “managers,” and as such, even when they work 60 or 70 hours a week, some retail store managers will only earn a modest salary within the $30,000 range. Perez believes that the imbalance between work done and salary earned is a huge contributor to dissatisfaction among the working class.
While some employers welcome the change, others have complained that the Labor Department’s changes are moving too quickly and are even hoping that Congress would block the rule. Business groups lobbied against it as well with claims that employers would be forced to cut back hours and have employees track their time. The National Retail Federation released a statement which advised that there is “not a golden pot of money” which employers can access to suddenly pay so much overtime.
However, the Obama administration seems to be giving employers two options: either a worker’s hours are limited to 40 per week so as to avoid them paying the time-and-a-half premium or they start paying workers for the extra time they actually work.
The way the White House finalized the rule ensures that Republicans in Congress have no options to bottle it up through a Congressional Review Act, and if they did indeed try to block it, such recourse would certainly face a veto by President Obama. The reform has been called the most consequential of his entire time in office.
The new rules are slated to go into effect as of December 1.
[Photo Courtesy of Alex Wong/Getty Images]