Article main image
Mar 13, 2014

In what could be BIG news for employers, President Obama is directing the U.S. Department of Labor to issue proposed regulations that would expand the number of employees who are eligible for overtime.

The regulations would raise the minimum salary an employee must receive to fall under the white collar exemption of the Fair Labor Standards Act.

Right now, the salary threshold is $455 per week (roughly $24,000 a year). While it’s not clear what the new threshold would be, some speculate that it could more than double.

One recent proposal would raise the limit to $984 per week (about $50,000 a year). Under that scenario, experts estimate that more than 5 million employees would be entitled to overtime who currently are not.

Tighter executive exemption?

The regulations also could tighten up the executive exemption as well.

According to White House officials, the rules might mandate that employees do a specified percentage of “executive”-type work before being exempted.

What’s next?

Employers and others will have an opportunity to comment on the proposed rules before they go into effect.

Here’s The Wall Street Journal’s take, and here’s a piece from The New York Times on this subject.

From The Journal:

Federal efforts to boost wages often set up clashes with certain business groups, who complain that higher labor costs can force them to cut jobs.

A White House official said Tuesday that overtime rules had “eroded” over the years. “For example, a convenience store manager or a fast-food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more … and not receive a dime of overtime pay,” the official said.

The change would come after the Labor Department solicits comments on the new threshold. (Former White House economist Jared)  Bernstein said officials were looking at raising the weekly salary threshold from anywhere between $550 a week to close to $1,000 a week.

“Between those two thresholds there are millions of salaried workers who will now be eligible for time and a half if they work overtime,” he said.”

“Something will have to adjust”

From The Times:

Conservatives criticized Obama’s impending action. “There’s no such thing as a free lunch,” said Daniel Mitchell, a senior fellow with the Cato Institute, who warned that employers might cut pay or use fewer workers. “If they push through something to make a certain class of workers more expensive, something will happen to adjust.”

Marc Freedman, the executive director of labor law policy for the U.S. Chamber of Commerce, said the nation’s overtime regulations “affect a very wide cross-section of employers and our members. I expect this is an area we will be very much engaged in,” Freedman said.

Obama’s authority to act comes from his ability as president to revise the rules that carry out the Fair Labor Standards Act, which Congress originally passed in 1938. George Bush and previous presidents used similar tactics at times to work around opponents in Congress.”

This was originally published on Manpower Group’s Employment Blawg.