Bloomberg News

Overtime Pay Would Reach More Workers Under Obama Order

March 12, 2014

U.S. Workers

U.S. workers now classified as executive, administrative or professional may include managers of fast-food restaurants and convenience stores who could receive overtime pay under the new rules, the official said. Photographer: David Paul Morris/Bloomberg

Some U.S. workers who don’t get overtime compensation under what’s known as the “white-collar exemption” would be able to collect extra pay under revised regulations President Barack Obama plans to order tomorrow, according to a White House economist.

Obama is directing the Labor Department to modify overtime rules so millions more people will be eligible for overtime pay for working more than 40 hours a week, Betsey Stevenson, a member of the Council of Economic Advisers, said.

The move was criticized by business groups, which said it would add to costs for companies.

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Workers now classified as executive, administrative or professional may include managers of fast-food restaurants and convenience stores who could receive overtime pay under the new rules, said Ross Eisenbrey, vice president of the Economic Policy Institute.

The administration is looking at “how we can make the labor force as fair as possible,” Stevenson said today at a White House briefing. “It’s a pretty simple idea; employers should pay people for the hours they work.”

President George W. Bush in 2004 set $455 per week as the threshold for what constitutes a white-collar worker for overtime pay purposes. The White House won’t set a new threshold tomorrow, leaving that up to the Labor Department to decide, Stevenson said.

Workers Affected

About 10 million workers might benefit from the rule if it applied to people making less than $50,000 a year, the Economic Policy Institute said today. The Washington-based group supports the change.

“It changes your quality of life when you know you can’t be required to work an extra 20 hours a week without being paid for it,” Eisenbrey said in a phone interview. “It could mean more money in your pocket, and on the other hand it could mean a more relaxed and reasonable life.”

The amount a change would cost employers depends on the threshold, which the institute recommends be about $52,000 a year, and on how employers decide to react, he said. Employers could limit workers to 40-hour work weeks or could pay workers time and a half for hours worked above 40.

The Obama proposal would restrict who can be labeled supervisors and made exempt from the rule, said Eisenbrey, who has talked with White House staff about it.

“The restaurant industry is famous for doing this, for calling people assistant managers,” he said. “Retail establishments do this, convenience stories. But it’s pretty widespread.”

Democratic Push

Democrats in 2004, led by presidential candidate John Kerry, who is now secretary of state, criticized the Bush plan saying it would cause more than 6 million workers to lose overtime pay.

While Bush got the change through in regulation, it also met opposition from both houses of Congress. Bush threatened to veto any legislation that would block it.

Obama’s move would mark the latest in a series of executive actions this year from the president, who said in his State of the Union address in January that he plans to use that authority when he can in the face of resistance in Congress. Obama raised the minimum wage for federal contract workers and is lobbying Congress to boost it to $10.10 an hour nationally.

The push for a higher federal minimum wage has become a centerpiece of Obama’s attempt to help Democratic Party candidates before the November midterm elections that will decide control of the U.S. House and Senate.

Minimum Wage

Republicans, including House Speaker John Boehner of Ohio, and business groups say that raising the minimum wage would lead to a reduction in jobs, hurting those it aims to help. A Congressional Budget Office report last month found that raising the rate in three steps as Obama proposes would reduce U.S. jobs by 500,000, or 0.3 percent, while lifting 900,000 people out of poverty.

Business groups today criticized the overtime plan, saying it would be another cost burden on companies.

It “demonstrates another anti-business policy -- coming on the heels of a proposal to increase the minimum wage, increase the minimum tipped wage, rising health-care costs, as well as ever-growing, costly and unwieldy regulations,” Eric Reller, a spokesman for the National Federation of Independent Business, said in an e-mail.

Business Impact

The overtime requirement would disproportionately hurt smaller businesses, the U.S. Chamber of Commerce said.

“We understand that the administration is looking for ways to put more money in people’s pockets, but the only way to do this is to grow the economy and create more jobs,” Blair Latoff Holmes, a spokeswoman for the chamber, based in Washington, said in an e-mail. “Adding more burdens to employers will not accomplish that goal.”

Sixty-nine percent of Americans, including 45 percent of Republicans, support the president’s call to raise the federal minimum wage to $10.10 over the next three years, according to a Bloomberg National Poll. Twenty-eight percent of poll respondents oppose such action.

The poll also showed that Republicans are finding persuasive counter-arguments, including the risk of job losses.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net Joe Sobczyk


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