A Welcome Announcement from the White House in Regards to Overtime Pay

Today the White House and the Department of Labor had some great news for American workers. The New York Times and the Washington Post report that President Obama will direct the Department of Labor to revamp certain regulations governing when a person is eligible for overtime. The reports indicate that the main change will be raising the income threshold for when salaried workers can be exempt from overtime.

As I wrote about earlier, currently a salaried worker must be paid at least $455 before they are exempt from being paid overtime for all hours worked over 40 in a week. This number was last raised in 2004 by President George W. Bush. The Times reminds us that as part of the 2004 changes “business groups persuaded President George W. Bush’s administration to allow them greater latitude on exempting salaried white-collar workers from overtime pay, even as organized labor objected.”

Some states have a higher threshold than required by federal law. In California the threshold is $640 a week. In New York, the threshold is $600 a week. Under recently passed laws, the California threshold is set to rise to $800 per week in 2016, and the New York threshold to $675.

This is a needed change. Currently an employee can make around $23,000 and not be eligible for overtime. Companies commonly put low level supervisors and “managers” on a salary to prevent having to pay overtime. The Times estimates that there are around 5 million workers making between $455 and $1000 a week. Raising the threshold could help millions of workers, their families, and their communities.

The White House is also planning to change the way an employee can be classified as exempt from overtime pay under the “executive” exemption. Currently an employee who supervises 2 or more co-workers and has the ability to hire and fire can considered exempt from the overtime requirements. Many managers spend the vast majority of their time doing the same work as the employees they supervise, especially in retail and fast food establishments. There are a lot of managers who don’t do much managing but are expected to work 50 or 60 hour weeks with no overtime for an effective hourly rate that is only a little more than the current minimum wage. President Obama’s regulatory changes will make it a requirement that the an employee must spend a majority of their work time supervising other employees before they are eligible for the executive exemption.

Raising workers’ pay is very important in light of changes to the economy that have been happening since Reagan was president in the 1980s. Since the mid-1980s, corporate profits have soared, reaching a post-World War II record as a share of economic output. The profits of the companies in the Standard & Poor’s 500 have doubled since the recession ended in June 2009, but wages have stagnated for a vast majority of workers in the same period. In 2012, the share of the gross domestic income that went to workers fell to 42.6 percent, the lowest on record.

Because of the Republicans in congress it is almost impossible to pass legislation to help improve workers’ pay. It is good to see President Obama using his executive authority to make a difference for millions of hard working Americans.

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