Human Resources News & Insights

Will Obama administration succeed in loosening OT restrictions?

President Obama wants to make it easier for your people to be eligible for overtime.  

The president announced this week that he was issuing an Executive Order instructing the Secretary of Labor to update the rules regarding who’s eligible for overtime pay and who’s not. “Unfortunately, today millions of American aren’t getting the extra pay they deserve,” Obama said at a White House ceremony on Thursday. ““Overtime is a pretty simple idea. If you have to work more, you should get paid more.”

According to a story in the New York Times, the administration is targeting two specific areas of the Fair Labor Standards Act overtime rules: exemptions for “supervisory” personnel and the minimum salary threshold.

As you know, under the current regs, to qualify for the “white-collar” exemptions, employees must be paid at least $455 per week on a salary basis and their job duties must meet specific tests outlined by the DOL.

Obama’s proposal would increase the salary threshold — some analysts are putting the number at as much as $1,000 per week — and substantially tighten the criteria for the “white collar” exemption.

In a fact sheet released by the White House, the administration noted that:

Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not.  That threshold has failed to keep up with inflation, only being updated twice in the last 40 years and leaving millions of low-paid, salaried workers without these basic protections. Specifically:

  • In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week.
  • In 2004 that threshold was set at $455 per week (the equivalent of $561 in today’s dollars). This is below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms.

The Times story explained that salaried workers making more than $455, or $23,660 a year, aren’t eligible for overtime if some of their work is considered supervisory even though many spend most of their day doing manual, clerical or technical work with few management duties.

“If you’re making $23,000 typically you’re not high in management,” Obama said.

The types of jobs that are most likely to be in the spotlight, according to law firm OgletreeDeakins

  • managers working at fast-food restaurants
  • loan officers
  • computer technicians, and
  • other workers who are currently classified as “executive or professional” but whose duties vary from management to day-to-day tasks.

Also expected to be big-time players in this game: retailers.

The proposed rule changes aren’t expected to be issued until the fall, at the earliest. An extended comment period will follow their release.

Not an immediate threat

So just how worried should employers be? Here’s what attorneys Doug Hass and Staci Ketsy Rotman of Franczek Radelet had to say:

Whether the DOL seeks to raise the income threshold or tighten the duties requirements (or both), any such move will likely have a substantial impact on employers by expanding the range of workers entitled to overtime pay.

While employers must view this initiative with caution, the impact is not likely to be immediate. Employers should have some time to prepare for (and respond to) whatever proposal is ultimately unveiled by the DOL.

The 2004 revisions to the FLSA regulations took the DOL nearly two years to implement from the preparation of initial draft changes to sifting through tens of thousands of public comments and following protocols established by the Office of Management and Budget for final approval.

The administration is also pushing for an increase in the federal minimum wage from its current $7.25 per hour to $10.10. Obama  recently signed an executive order mandating the increase for federal contractors.

 

 

 

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