The Labor Department could propose a rule that would raise the current overtime threshold — $23,660 – to as much as $52,000.
As early as this week, the Labor Department could propose a rule that would raise the current overtime threshold — $23,660 – to as much as $52,000, extending time and a half overtime pay to millions of American workers. The rule has already come under fire from business and Republican opponents who say it will kill jobs and force employers to cut hours for salaried employees.
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“The minimum wage they can’t do,” said Bill Samuel, director of legislative affairs for the AFL-CIO. “This is probably the most significant step they can take to raise wages for millions of workers.”
Congressional Republicans are gearing up for a major battle against raising the overtime threshold. The House Education and the Workforce subcommittee will devote much of a scheduled June 10 hearing on federal wage and hour standards to the overtime rule, even if it isn’t yet released. Sen. Lamar Alexander, chairman of the Senate Health, Education, Labor and Pensions committee, said the rule—sight unseen—“seems engineered to make it as unappealing as possible to be an employer creating jobs in this country.”
The business lobby, which is currently battling in two court venues what it calls the National Labor Relations Board’s “ambush elections rule” streamlining union elections, is likely to devote at least as many resources to fight the overtime rule. Randel Johnson, senior vice president for labor at the Chamber of Commerce, warned Labor Secretary Tom Perez in a Feb. 11 letter that any changes to existing overtime rules “threaten to upend years of settled law, create tremendous confusion, and have a significantly disruptive effect on millions of workplaces.”
By law, any salaried worker who earns below a threshold set by the Labor Department must receive overtime. The current threshold of $23,660 lies below the poverty line for a family four. The proposed rule is expected to raise that to somewhere between $45,000 and $52,000—closer to the median household income—greatly expanding the pool of Americans who qualify for overtime pay.
The overtime threshold is not indexed to inflation and has been updated only once since 1975. It covers 12 percent of salaried workers. Boosting the threshold to $50,440 would bring it back in line with the 1975 threshold, after inflation. By one estimate that would give somewhere between five to ten million workers a raise.
Some workers above the salary threshold also qualify for overtime pay under current law. But the historic shift from a manufacturing-based economy to a service economy has reduced their number because white collar workers—defined quite expansively—are exempt. The forthcoming overtime rule is expected to tighten up that definition.
Under the current rules, the white collar exemption excludes “executive, administrative and professional” employees from receiving overtime pay, which means, for example, that a secretary will sometimes be ineligible for overtime pay. Employers routinely avoid paying overtime to lower-wage workers such as store managers or fast food shift supervisors, and even to some non-supervisory workers by giving them discrete, only nominally supervisory responsibilities.
“It’s hard to believe that somebody making $30,000 is a supervisor,” said Daniel Hamermesh, an economist at the University of Texas at Austin, who has done extensive research on overtime. “At this point, I don’t think even our regulations are in line with the original intent of the law.” Hamermesh said raising the threshold was “an absolute no brainer.”
One key concern about expanding overtime is that it could prompt employers to reduce the number of hours that individual employees work to avoid paying time-and-a-half. McDonald’s, reportedly, already uses its computer system to record the hours worked by individual fast-food workers, and sends alerts telling franchisees to send this or that worker home when he or she is about to exceed 40 hours. In many instances reducing employees’ hours worked may endanger their eligibility for benefits.
Business groups carry that reasoning further, saying the rule will reduce employment. Aloysius Hogan, a senior fellow at the conservative Competitive Enterprise Institute, said it will have a “job killing effect.” Hogan said businesses will be incentivized to lay off higher-paid executives and replace them with lower-paid workers. The National Retail Federation, a likely leader in the battle against expanded overtime, last month issued a study that came to a similar conclusion. On its release NRF senior vice president for Governor Relations David French said the rule would “hollow out middle-management careers and middle-class opportunities for millions of workers.”
But Hamermesh said that to whatever extent employers reduced hours to avoid overtime the result would be more job creation, not less, since someone else must hired to perform that work. Jared Bernstein, an economic adviser to Vice President Joe Biden during President Barack Obama’s first term, added that for many workers reduced hours would be a plus: “Their salary is the same but they have more time with their families.”
The Obama administration’s interest in updating overtime rules can be traced to November 2013, when Bernstein, by then a senior fellow at the Center on Budget and Policy Priorities, and Ross Eisenbrey, vice president of the Economic Policy Institute, presented a paper on the subject to the Labor Department. The following March President Obama issued a memorandum noting that overtime regulations “have not kept up with our modern economy” and instructing the Labor department to draft revisions.
Both Eisenbrey and Bernstein voiced optimism that the administration will have time to review public comments on the proposed rule and issue a final rule before the president leaves office. But that’s not likely to happen without a fight. When Obama issued his memorandum last year, House Education and the Workforce Committee Chairman John Kline and subcommittee chairman Tim Walberg issued a statement saying “executive memos and unilateral actions cannot provide the income security our struggling families need.” Republicans, they said, had long recognized the need to update the Fair Labor Standards Act, but they warned the rule should not be “just another political distraction from the president’s failed policies.” If the response to the “ambush elections” rule is any guide, there will be litigation against the overtime rule and at least one attempt by the Republican Congress to block its implementation.
The fight is already spilling over into the 2016 presidential contest. In announcing his candidacy May 30 former Maryland Gov. Martin O’Malley called for “overtime pay for overtime work.” Sen. Bernie Sanders did the same in his May 26 kick-off speech in Burlington, Vt., calling it a “ scandal” that “millions of American employees, often earning less than $30,000 a year, work 50 or 60 hours a week— and earn no overtime.”
Thus far the Republican field is somewhat dismissive of the overtime issue. When asked to comment on the forthcoming rule Rick Tyler, Sen. Ted Cruz’s national spokesperson, replied in an e-mail, “Overtime? [Who’s] working overtime anymore since Obamacare? People are not even getting full time.” Stuart Stevens, a top strategist for Mitt Romney’s 2012 campaign, echoed that sentiment. “It’s just not a solution to a larger problem [of] the economy,” he said. “I think the fact that so few people can get full time jobs is a lot more pressing than overtime.”
But a spokesman for Dr. Ben Carson addressed the overtime rule more directly. “I don’t think anyone has offered any compelling evidence that a new labor department overtime regulation is warranted,” he said.
Brian Mahoney contributed to this report.
Read more: http://www.politico.com/story/2015/06/barack-obama-overtime-salary-levels-white-house-118688.html#ixzz3cgr6vx2w
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