WASHINGTON -- President Obama on Tuesday announced that the U.S. Department of Labor will propose extending overtime pay to nearly five million workers, including those in convenience store, gas stations, other retail outlets and restaurants. The proposal would guarantee overtime pay to most salaried workers earning less than an estimated $50,440 next year.
Today, the salary threshold remains at $23,660 ($455 per week), which is below the poverty threshold for a family of four, and 8% of full-time salaried workers fall below it, according to the White House fact sheet.
The President directed the Secretary of Labor to update regulations relating to who qualifies for overtime pay so that they reflect the intent of the Fair Labor Standards Act, and to simplify the rules.
The proposal would:
- Raise the threshold under which most salaried workers are guaranteed overtime to equal the 40th percentile of weekly earnings for full-time salaried workers. As proposed, this would raise the salary threshold from $455 a week ($23,660 a year)—below the poverty threshold for a family of four—to a projected level of $970 a week ($50,440 a year) in 2016.
- Extend overtime pay and the minimum wage to nearly five million workers within the first year of its implementation, of which 56% are women and 53% have at least a college degree.
- Provide greater clarity for millions more workers so they and their employers can determine more easily if they should be receiving overtime pay.
- Prevent a future erosion of overtime and ensure greater predictability by automatically updating the salary threshold based on inflation or wage growth over time.
The proposal does not include specific regulatory changes to the “duties test” that determines whether salaried workers earning more than the threshold are entitled to an exemption from overtime rules. Hourly workers would generally continue to receive overtime pay, as they do under current rules. Consistent with the normal rulemaking process, when the Department of Labor’s Notice of Proposed Rulemaking is published in the coming days, there will be opportunities to submit comments in writing. Only after reviewing and considering all the comments will the Department determine what to include in a final rule next year.
Click here to view the White House Fact Sheet. And click here for a Labor Department infographic.
“The Administration seems to be under the distorted impression that they can build the middle class by government mandate. Turning managers into rank-and-file hourly workers takes away the career opportunities offered by private-sector entrepreneurs and job creators that are the true path to middle-class success,” said David French, senior vice president for government relations for the National Retail Federation (NRF), in a statement issued following the White House and Labor Department announcement.
“This proposal isn’t a law but it certainly reflects one—the law of unintended consequences at a time when the economy and those struggling the most can least afford it. Our research shows that the managers who would supposedly benefit oppose this plan and that few workers would actually see more take-home pay. There simply isn’t any magic pot of money that lets employers pay more just because the government says so.”
He continued, “The proposal is open for comment before it becomes final, and we will continue to fight a subjective problem with quantifiable facts based upon the reality of running a business and creating jobs in today’s economy.”
The NRF said it is leading the business community’s efforts around the overtime regulations and has conducted research on the practical implications of the overtime proposals and surveyed retail managers’ reaction to the plan.
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