President Obama Proposes To Increase Salary Threshold For Overtime Pay

NY Times: Obama Admin Will Direct Labor Department To Reevaluate Overtime Pay Regulations. On March 12, The New York Times reported that President Obama will use his executive authority to direct the Labor Department to change standards in order to increase the number of salaried workers who qualify for overtime compensation under the Fair Labor Standards Act:

Under the new rules that Mr. Obama is seeking, fewer salaried employees could be blocked from receiving overtime, a move that would potentially shift billions of dollars' worth of corporate income into the pockets of workers. Currently, employers are prohibited from denying time-and-a-half overtime pay to any salaried worker who makes less than $455 per week. Mr. Obama's directive would significantly increase that salary level.

In addition, Mr. Obama will try to change rules that allow employers to define which workers are exempt from receiving overtime based on the kind of work they perform. Under current rules, if an employer declares that an employee's primary responsibility is executive, such as overseeing a cleanup crew, then that worker can be exempted from overtime. [The New York Times, 3/12/14]

Fox Attacks Move As “Unprecedented,” Predicts Hiring Decrease

Fox: Changing Requirements Is “Unprecedented” And Will Hurt Job Growth. On the March 12 edition of Fox News' Fox & Friends, Fox Business host Stuart Varney claimed that the proposed change is “unprecedented,” and an effort by Obama to “buy votes.” Varney went on to claim that the new regulations would hurt business, wages, and hiring:

VARNEY: I would say this is unprecedented. For the first time in a major way the president of the United States, the government, is by command saying, "hey all you salaried people, you're going to get paid more. Now, we've never done that before, to my knowledge. Maybe we've done it in very limited areas with salaried people. But this is unprecedented. It breaks really new ground. You're raising the cost of hiring to all businesses and you're changing the way we set wages and salaries. We're now saying the government will command this.

HASSELBECK: But to voters, you know, financially this may not be wise, right? In terms of where the money comes from. Politically, this probably the smartest thing that could happen, am I wrong?

VARNEY: He's buying votes. This is buying votes. Businesses will have to pay for this.

[...]

KILMEADE: But what the president doesn't seem to understand is there is a reaction to everything. Now the reaction of business to these new rules will be they're in the profit making business, so what is that going to mean for hiring? What is it going to mean for employees and the number of hours they work?

VARNEY: It's going to depress hiring. [Fox News, Fox & Friends, 3/12/14]

Fox's Martha MacCallum: Expanding Overtime Eligibility Is “Forced Income Redistribution.” On the March 12 edition of Fox News Radio's Kilmeade & Friends, Fox host Martha MacCallum railed against expanding overtime compensation, saying it would change workers' mentality and calling the proposal “forced income redistribution”: 

MACCALLUM: What the administration is grasping for here, to counteract the rebellion in many part against Obamacare is the minimum wage and increasing overtime pay, right? So they're going to the other side of the spectrum, exactly the opposite of what we're talking about here which is to continue to sort of - you know, give people, it's income redistribution essentially, I mean that's what that is.

If you're saying to employers, people that you consider to be managers or executives you're now going to have to pay overtime to, so these people who are trying to dedicate themselves to better their position in the company by working really hard and putting in extra hours - you know, that they're going to fall now into an hourly wage category, which puts you into a whole different mentality, I think, as an employee. But, I mean, that's forced income redistribution. [Fox News Radio, Kilmeade & Friends, 3/12/14]

Adjustments To Overtime Pay Requirements Are Not Unprecedented

EPI's Ross Eisenbrey: “The Ford Administration Raised The Threshold In 1975.” In a January 10 op-ed for The New York Times, Economic Policy Institute (EPI) vice president Ross Eisenbrey noted that the Ford administration raised the overtime salary threshold in 1975:

When the Ford administration raised the threshold in 1975, it was 1.6 times the median wage. Today's median wage for 40 hours of work is about $670. Were we to update that value by the same 1.6 ratio that prevailed in the mid-1970s, we'd end up with a threshold above $1,000, suggesting that $970 is, if anything, on the low side. [The New York Times, 1/10/14]

EPI Report: The Bush Administration Adjusted Overtime Salary Requirements. A January 27 EPI article reported that the Bush Administration also adjusted the salary threshold for overtime pay, minimally raising the salary threshold to allow workers making under $455 per week, or $23,660 per year to qualify for protected overtime pay. [Economic Policy Institute, 1/27/14]

Changes To Overtime Threshold Rules Are Overdue  

Eisenbrey: Current Overtime Salary Threshold “Is Far Below Historical Levels In Real Terms.” In his January 10 op-ed for the New York Times, Eisenbrey pointed out that the current salary requirement has fallen behind inflation and is now “indefensibly” low because it has not been adequately adjusted for inflation:

But as with the minimum wage, which is not automatically adjusted for inflation and tends to lose real value unless it is raised, the overtime exemption threshold generally languishes. That means that many people who once would have been paid 1.5 times their wage when working overtime are not, violating the spirit of the law.

For decades, the Department of Labor periodically updated the overtime salary threshold. But today's threshold, at $455 a week, is far below historical levels in real terms. And at just $2 a week more than a poverty-level income for a family of four, it is indefensibly low. I propose that President Obama raise the threshold to $970, equal in today's dollars to the 1975 level of $250. [The New York Times, 1/10/14]

EPI: Employers Routinely Exploit Loopholes To Avoid Paying Overtime. EPI outlined how many employers and companies have denied workers due overtime compensation by using tricks like changing employees' titles to exploit loopholes in the current requirements:

One reason Americans' paychecks are not keeping pace with their productivity is that millions of middle-class and even lower-middle-class workers are working overtime and not getting paid for it. This is because the federal wage and hour law is out of date. 

[...]

[M]any companies have worked to get around these overtime rules; for example, cooks can be called “managers” so that their employer can deny them overtime. The too-low salary threshold, and outdated definitions of who is exempt from overtime, can and should be fixed by the Secretary of Labor. [Economic Policy Institute, 1/27/14]

NY Times: Change Could Stop Rule Abuse By Employers, Shift Billions To Workers. According to The New York Times, the potential changes are partially a response to existing rule abuse by employers looking to avoid paying overtime. As the Times reported, “new rules could require that employees perform a minimum percentage of ”executive" work before they can be exempted from qualifying for overtime pay." This shift could put billions of earned income back into workers' pockets:

Under the new rules that Mr. Obama is seeking, fewer salaried employees could be blocked from receiving overtime, a move that would potentially shift billions of dollars' worth of corporate income into the pockets of workers. Currently, employers are prohibited from denying time-and-a-half overtime pay to any salaried worker who makes less than $455 per week. Mr. Obama's directive would significantly increase that salary level. [The New York Times, 3/11/14]

Economist Jared Bernstein: A Potential Side Effect May Be “More Hiring In Order to Avoid Overtime Costs.” The New York Times quoted economist Jared Bernstein reiterated that expanding overtime compensation improves fair treatment of employees and may increase hiring:

“I think the intent of the rule change is to make sure that people working overtime are fairly treated,” he said. “I think a potential side effect is that you may see more hiring in order to avoid overtime costs, which would be an awfully good thing right about now.” [The New York Times, 3/11/14]