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White House Increases Overtime Eligibility by Millions White House Increases Overtime Eligibility by Millions
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WASHINGTON — The Obama administration, in a far-reaching effort to improve the lot of workers that has ignited criticism from business groups, announced on Tuesday that it was making millions more employees eligible for overtime pay.WASHINGTON — The Obama administration, in a far-reaching effort to improve the lot of workers that has ignited criticism from business groups, announced on Tuesday that it was making millions more employees eligible for overtime pay.
Under the new regulation to be issued by the Labor Department on Wednesday, most salaried workers earning up to $47,476 a year must receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660.Under the new regulation to be issued by the Labor Department on Wednesday, most salaried workers earning up to $47,476 a year must receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660.
“This is a big deal to be able to help that many working people without Congress having to pass a new law,” said Ross Eisenbrey of the Economic Policy Institute, an early voice in urging the administration to take up the issue. “It’s really restoring rights that people had for decades and lost.”“This is a big deal to be able to help that many working people without Congress having to pass a new law,” said Ross Eisenbrey of the Economic Policy Institute, an early voice in urging the administration to take up the issue. “It’s really restoring rights that people had for decades and lost.”
The change is expected to play out in a variety of ways. Once the rule goes into effect on Dec. 1, many workers will receive more pay when they work overtime, but others may end up working fewer hours if employers move to limit their time at work. In other cases, employers may decide to increase the salaries of some workers to push them over the limit so that companies will not have to pay overtime or hire additional workers after limiting hours for existing workers. The change is expected to play out in a variety of ways. Once the rule goes into effect on Dec. 1, many workers will receive more pay when they work overtime, but others may end up working fewer hours if employers move to limit their time at work. In other cases, employers may decide to increase the salaries of some workers to push them over the cutoff so that the employers will not have to pay overtime or hire additional workers after limiting hours for existing employees.
Vice President Joseph R. Biden Jr., who will travel to Columbus, Ohio, on Wednesday to promote the new rules, said they touched on a core issue for Mr. Obama — ensuring that middle-class workers are treated fairly.Vice President Joseph R. Biden Jr., who will travel to Columbus, Ohio, on Wednesday to promote the new rules, said they touched on a core issue for Mr. Obama — ensuring that middle-class workers are treated fairly.
“The middle class is getting clobbered,” Mr. Biden told reporters. “If you work overtime, you should actually get paid for working overtime.”“The middle class is getting clobbered,” Mr. Biden told reporters. “If you work overtime, you should actually get paid for working overtime.”
“For the past 40 years, overtime protections have been increasingly weakened,” Mr. Biden added, noting that more than 60 percent of salaried workers qualified for overtime in 1975 based on their salaries, but only 7 percent do today.“For the past 40 years, overtime protections have been increasingly weakened,” Mr. Biden added, noting that more than 60 percent of salaried workers qualified for overtime in 1975 based on their salaries, but only 7 percent do today.
Opponents argued that the measure could cost billions of dollars and would undermine the morale of salaried employees by requiring them to account for every hour of their workdays.Opponents argued that the measure could cost billions of dollars and would undermine the morale of salaried employees by requiring them to account for every hour of their workdays.
“This is an extreme revision in the white-collar threshold,” said David French of the National Retail Federation. “By executive fiat, the Department of Labor is effectively demoting millions of workers.”“This is an extreme revision in the white-collar threshold,” said David French of the National Retail Federation. “By executive fiat, the Department of Labor is effectively demoting millions of workers.”
Republican lawmakers, who are close to many of the industries that oppose the new rule, have vowed to block it during a mandated congressional review period.Republican lawmakers, who are close to many of the industries that oppose the new rule, have vowed to block it during a mandated congressional review period.
With Donald J. Trump as their presumptive presidential nominee, however, the issue is fraught with risk for Republicans. Any attempt to repeal the regulation could exacerbate an already palpable split between Mr. Trump’s blue-collar supporters and the party’s establishment donors and politicians.With Donald J. Trump as their presumptive presidential nominee, however, the issue is fraught with risk for Republicans. Any attempt to repeal the regulation could exacerbate an already palpable split between Mr. Trump’s blue-collar supporters and the party’s establishment donors and politicians.
Paul Porter, a truck driver from Ava, Mo., who is a member of the Teamsters union and a supporter of Mr. Trump, said he already received time and a half after eight hours of work, but strongly favored the new overtime regulation. “I have friends who are managers who get taken advantage of terribly,” he said.Paul Porter, a truck driver from Ava, Mo., who is a member of the Teamsters union and a supporter of Mr. Trump, said he already received time and a half after eight hours of work, but strongly favored the new overtime regulation. “I have friends who are managers who get taken advantage of terribly,” he said.
The administration, for its part, expressed confidence it was holding the better political hand. “I welcome a debate in Congress about wages in this country,” Thomas E. Perez, the secretary of labor, said. “It crystallizes the difference between this president and the leadership in Congress.”The administration, for its part, expressed confidence it was holding the better political hand. “I welcome a debate in Congress about wages in this country,” Thomas E. Perez, the secretary of labor, said. “It crystallizes the difference between this president and the leadership in Congress.”
Federal employment law provides two ways for most salaried workers to become eligible for overtime. The first is through a so-called duties test that essentially determines whether or not they are bona fide executives, administrators or professionals, which has historically meant spending most of their time exercising some decision-making authority. If not, they are supposed to be eligible for overtime pay. That method is open to interpretation.Federal employment law provides two ways for most salaried workers to become eligible for overtime. The first is through a so-called duties test that essentially determines whether or not they are bona fide executives, administrators or professionals, which has historically meant spending most of their time exercising some decision-making authority. If not, they are supposed to be eligible for overtime pay. That method is open to interpretation.
The second is more of a hard-and-fast standard, setting a salary level to determine eligibility for overtime, regardless of duties. So even for employees who are legitimately managers, if their salary is below the cutoff, they must be paid overtime.The second is more of a hard-and-fast standard, setting a salary level to determine eligibility for overtime, regardless of duties. So even for employees who are legitimately managers, if their salary is below the cutoff, they must be paid overtime.
Certain categories of workers, like teachers, doctors and outside sales representatives, continue to be exempt from the regulation, though academics primarily engaged in research are not.Certain categories of workers, like teachers, doctors and outside sales representatives, continue to be exempt from the regulation, though academics primarily engaged in research are not.
The overtime rule dates back to the passage of the 1938 law that established a federal minimum wage. The cutoff has been raised several times over the years. In 2004, the Bush administration also made it easier to exempt workers above the cutoff under the duties test.The overtime rule dates back to the passage of the 1938 law that established a federal minimum wage. The cutoff has been raised several times over the years. In 2004, the Bush administration also made it easier to exempt workers above the cutoff under the duties test.
Proponents like Mr. Eisenbrey urged the administration to raise the cutoff to about $51,000, which, in inflation-adjusted dollars, is roughly where it stood in 1975, when the Ford administration undertook the last major expansion of overtime eligibility.Proponents like Mr. Eisenbrey urged the administration to raise the cutoff to about $51,000, which, in inflation-adjusted dollars, is roughly where it stood in 1975, when the Ford administration undertook the last major expansion of overtime eligibility.
In addition to increasing the basic ceiling, which will be set to match the pay of full-time salaried workers earning at the 40th percentile of salaries in the South, the lowest-income region today, the new regulation will be updated every three years to keep pace with changes in pay. In addition to increasing the basic ceiling, which will be set to match the pay of full-time salaried workers earning at the 40th percentile of salaries in the country’s lowest-income region, currently the South, the new regulation will be updated every three years to keep pace with changes in pay.
The Labor Department calculates that 4.2 million workers will become newly eligible for overtime. In addition, nearly nine million more workers who should be eligible for overtime under the current duties test will be protected against being denied overtime illegally. The Labor Department calculates that 4.2 million workers will become newly eligible for overtime. Other estimates put the number of newly eligible workers substantially higher.
The most heated debate concerns the fate of those workers who are relatively far from the new cutoff. Critics argue that employers will simply lower the base wage for a majority of affected workers, so that their overall pay, including overtime pay, will remain the same. In addition, according to the department, nearly nine million more workers who should already be eligible for overtime under the current duties test will be protected against being denied overtime illegally.
A projection by the consulting firm Oxford Economics, prepared for the National Retail Federation, predicted that a “disproportionate number of workers” who became eligible for overtime would “see their hourly rates decreased by an equal amount, leaving their total annual earnings unchanged.” The most heated debate concerns the fate of those workers who are relatively far from the new cutoff. Critics argue that employers will simply lower the base wage for a majority of affected workers who work overtime, so that their overall pay, including overtime pay, will remain the same.
A projection by the consulting firm Oxford Economics, prepared for the National Retail Federation, predicted that a “disproportionate number of workers” who became eligible for overtime and worked more than 40 hours would “see their hourly rates decreased by an equal amount, leaving their total annual earnings unchanged.”
By contrast, Daniel Hamermesh, a labor economist at the Institute for the Study of Labor, predicted that base wages would fall somewhat over time, but that the higher overtime payments would more than offset any loss in regular salary levels.By contrast, Daniel Hamermesh, a labor economist at the Institute for the Study of Labor, predicted that base wages would fall somewhat over time, but that the higher overtime payments would more than offset any loss in regular salary levels.
The regulation, which President Obama directed the Labor Department to work on in 2014 and which the department first proposed last July, provoked a deluge of comments from the public — nearly 300,000 in all.The regulation, which President Obama directed the Labor Department to work on in 2014 and which the department first proposed last July, provoked a deluge of comments from the public — nearly 300,000 in all.
Many opponents argued that the new salary level was not just too high, but would also unfairly affect lower-wage regions of the country. The department decreased its proposed cutoff of $50,440 in response. It also changed its proposed annual indexing to once every three years, and decided against revisiting the 2004 changes to the duties test, which it had considered. Many opponents argued that the new salary level would unfairly affect lower-wage regions of the country. The department decreased its proposed cutoff of $50,440 in response. It also changed its proposed annual indexing to once every three years, and decided against revisiting the 2004 changes to the duties test.
Groups representing colleges and universities, local and county governments, and smaller nonprofits also expressed concerns about the cost of the new regulation. Groups representing colleges and universities, local governments, and smaller nonprofits also expressed concerns about the cost of the new regulation.
Elward Edd, the head of human resources at the Hopi Tribal Housing Authority in Arizona, said the burden of the new regulation would force him to scale back his hiring to one construction crew from two. Elward Edd, an official at the Hopi Tribal Housing Authority in Arizona, which has a backlog of more than 500 homes to repair, said the burden of the new regulation would force him to scale back hiring to one construction crew from two.
Mr. Edd said he was not certain the new regulation would apply to his tribe, but planned to follow it until obtaining clarity. Labor Department officials said it would not.Mr. Edd said he was not certain the new regulation would apply to his tribe, but planned to follow it until obtaining clarity. Labor Department officials said it would not.
Many critics argued that the need to closely monitor hours would impinge on workers’ freedom and could damage an employee’s status and sense of self-worth in the workplace. Many critics argued that the need to closely monitor hours would impinge on workers’ freedom by preventing them from working as long as they like, and could damage an employee’s status and sense of self-worth.
But at least some of the likely beneficiaries of the new overtime rule took issue with the prediction of looming morale problems. “That is so out of touch,” said Erin Clark, a postdoctoral fellow at Brandeis University who spends about 60 hours a week doing research on neurons and makes $46,344 after having earned a Ph.D. from Harvard.But at least some of the likely beneficiaries of the new overtime rule took issue with the prediction of looming morale problems. “That is so out of touch,” said Erin Clark, a postdoctoral fellow at Brandeis University who spends about 60 hours a week doing research on neurons and makes $46,344 after having earned a Ph.D. from Harvard.
When the regulation goes into effect, Dr. Clark added, “it will at least feel like you’re out there in the job market with everyone else, on some sort of playing field, as opposed to this weird vestigial training position.”When the regulation goes into effect, Dr. Clark added, “it will at least feel like you’re out there in the job market with everyone else, on some sort of playing field, as opposed to this weird vestigial training position.”