President Obama proposed Tuesday overhauling America’s overtime rules for salaried workers, so that nearly 5 million of them will be able to receive fair overtime pay.
For decades, millions of workers who should have been entitled to overtime pay were deprived of it for two reasons: first, because Congress had failed to raise the minimum overtime pay threshold beyond $23,660 a year (or $455 a week). So, if you made more than that as a salaried worker, you couldn’t get overtime. The Administration’s proposal would remedy that by raising the minimum to $50,440, or $970 a week.
The government had also allowed employers to classify certain workers, like assistant managers at fast food restaurants, or store managers at big-box retail chains, as exempt from the overtime rule. The Department of Labor has an extensive list of who was suffering under such exemptions here.
Basically, given the existing salary threshold and the plethora of exemptions, almost no one was earning proper overtime pay.
Under the new proposal, most of these exemptions will be wiped out.
According to a White House fact sheet, 2.6 million female white collar employees and 2.1 million male white collar workers will now be covered by federal overtime rules. Nearly 2 million workers aged 16-34 will also be affected.
Wholesale and retail trade workers stand to see the largest benefit, according to the White House.
And on a state by state basis, southern workers stand to see the greatest gains.
The restaurant industry is criticizing the rule, saying it will make it harder for workers to seek promotions.
“More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions and move up with new, performance-based incentives,” the National Restaurant Association said in a release. “If these regulations stand, that mobility and adaptability of employee schedules, which makes our industry appealing, will be severely diminished.”
But Christine Owens, executive director of the National Employment Law Project, called the existing situation “abusive.”
“We will no longer have the same situation where fewer workers will be leaving the starting gate without overtime eligibility,” she said on a conference call with reporters.
Even if employers do decide to limit overtime hours in response to the rule, “those hours will have to go somewhere,” Ross Eisenbrey, vice president of the Economic Policy Institute, a left-leaning nonprofit think tank, said on the call. That will likely increase pay or even create jobs for other workers, he said.
Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.