Millions more American workers will soon be eligible for overtime pay under a rule being finalized Wednesday by the Labor Department.
The rule says anyone who makes less than $47,476 per year must receive time-and-a-half pay for hours worked beyond 40 hours a week. That's roughly double the current threshold of $23,660.
The measure is one of the most sweeping moves the Obama administration has made so far in its efforts to boost slow-growing incomes. But it's sure to face opposition from some business owners.
According to the Labor Department, the higher income threshold will make 4.2 million salaried workers newly eligible for overtime pay. The rule could also benefit millions of others who are already technically eligible but not receiving overtime.
"Our whole mission here is about strengthening and growing the middle class," Labor Secretary Tom Perez told NPR. "In order to do that, we need to ensure that middle class jobs pay middle class wages."
The rule change is authorized under New Deal-era legislation called the Fair Labor Standards Act. As recently as 1975, more than 60 percent of salaried workers were eligible for overtime. Inflation and regulatory changes under the George W. Bush Administration eroded that protection, and today, only about 7 percent of salaried workers receive time and a half when they work extra hours. Managers at many retail stores and fast food restaurants making as little as $24,000 have not been eligible for overtime, even when they work 60 or 70 hours a week.
"The angst that people feel across this country is so frequently the product of the fact that they're working hard and falling further behind," Perez said. "They feel like they lost leverage. And the reason they feel that is because in the case of the Fair Labor Standards Act, they indeed lost a lot of leverage."
The new rule has been more than two years in the making. The Labor Department initially proposed an even higher income threshold of more than $50,000 but scaled that back in response to complaints that it didn't reflect pay scales in low-wage parts of the country. The new threshold will cover about 35 percent of salaried workers, Perez says.
Some employers have welcomed the change, and Vice President Joe Biden will meet with one of those on Wednesday. But others complain that the Labor Department is moving too quickly.
"What our members have told us, what many other employers have told us, is there's not a golden pot of money out there sitting in employers' pockets where they can all of a sudden pay a lot more overtime pay," said David French, vice president of the National Retail Federation. "Instead, they're going to make the rational change and they're going to change jobs."
Critics are urging Congress to block the new rule, but any such push would face a certain veto by President Obama.
Secretary Perez says employers have a variety of ways they can comply with the new rule when it takes effect Dec. 1. "People are going to get at least one of three benefits," Perez said. "They're either going to get more money ... more time with their family, or everybody is going to get clarity."
RENEE MONTAGNE, HOST:
Millions more American workers will soon be eligible for overtime pay under a rule being finalized today by the Labor Department. The rule says anyone who makes less than about $47,000 a year should receive time-and-a-half pay when they work more than 40 hours a week.
The measure is one of the most sweeping moves the Obama administration has made so far in an effort to boost slow-growing incomes. And it's sure to face opposition from some business owners. NPR's Scott Horsley is on the line with us now to talk about this. Good morning.
SCOTT HORSLEY, BYLINE: Good morning, Renee.
MONTAGNE: How many workers will be affected by this rule?
HORSLEY: The Labor Department says there are more than 4 million workers who will be newly eligible for overtime play. And millions more could benefit as the rule helps clarify who's entitled to extra pay when they work more than 40 hours a week. There has long been an exemption in the overtime law for white-collar workers who are highly paid.
But over time, that exemption has widened and moved down the income ladder. So today, you have people who might work 50, 60 hours a week at a retail store or a fast food restaurant and who make as little as $24,000 a year, and they're not getting overtime. So Labor Secretary Tom Perez wants to change that.
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TOM PEREZ: Our whole mission here is about strengthening and growing the middle class. And in order to do that, you need to make sure that middle-class jobs pay a middle-class wage.
HORSLEY: So the rule Perez and his department are finalizing today basically doubles the threshold under which workers must receive overtime pay. It takes effect in December, and it's going to be automatically adjusted every three years to keep pace with inflation.
MONTAGNE: And is this something the administration can do strictly on its own?
HORSLEY: It is. Unlike the president's unsuccessful push to boost the minimum wage, which would take an act of Congress, overtime is already enshrined in law. It just needs to be updated by the department. In fact, if you were to go back to the mid-1970s and just use the overtime rule that was in effect back then and put it in today's dollars, the threshold would actually be higher than what the department's putting out today.
Since that time, Perez says, workers have lost a lot of bargaining power.
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PEREZ: The angst that people feel across this country is so frequently the product of the fact that they're working hard and falling further behind. They feel like they lost leverage. And the reason they feel that is because in the case of the Fair Labor Standards Act, they indeed lost a lot of leverage.
HORSLEY: So this rule coming out today is designed to counteract that and help workers catch up, at least a little bit.
MONTAGNE: And I imagine this will create some sticker shock for some employers. So what are they saying about this?
HORSLEY: Yeah, some employers say they welcome this new rule. And Vice President Biden's going to meet with one of those in Ohio later today. But others will certainly be fighting it. David French is with the National Retail Federation. He says the Labor Department has gone too far here, and he's asking Congress to undo this new regulation.
DAVID FRENCH: Change in the overtime rule does not mean more overtime pay. What our members have told us, what many other employers have told us, is that there's not a golden pot of money out there sitting in employers' pockets that all of a sudden, they can pay a lot more in the way of overtime pay. So they're going to make the rational change, and they're going to change jobs.
MONTAGNE: And, Scott, what about that - employers, can they simply decide they're not going to pay overtime and just cut people's hours?
HORSLEY: Well, the Labor Department says if that's the case, some workers will get overtime, some will get more free time to spend with their families. And some people who've been working part-time or maybe haven't been working at all will now see additional hours to help make up the gap.
MONTAGNE: Scott, thanks very much.
HORSLEY: It's my pleasure, Renee.
MONTAGNE: That's NPR's Scott Horsley on the Obama administration's new plan to expand overtime pay. Transcript provided by NPR, Copyright NPR.