President Obama signed an executive order that will require some businesses to pay more overtime to workers who have been exempt in the past.
The order restricts companies from classifying certain employees as “executive, administrative or professional” to avoid paying them overtime.
At a White House event, Obama said an exception to overtime rules that was originally meant for high-paid, white-collar employees now covers workers earning as little as $23,660 a year.
“If your salary is even a dollar above the current threshold, you may not be guaranteed overtime,” Obama said. “It doesn't matter if what you do is mostly physical work like stocking shelves, it doesn't matter if you’re working 50 or 60 or 70 hours a week -- your employer doesn't have to pay you a single extra dime. And I think that’s wrong.”
He said the rule makes it possible for salaried workers to be paid less than the minimum wage.
“If you’re working hard, you’re barely making ends meet, you should be paid overtime,” Obama said. “Because working Americans have struggled through stagnant wages for too long.”
Obama said the White House will consult with workers and businesses as it updates overtime rules and will work to simplify the system for employers and employees alike.
“With any kind of change like this, not everybody is going to be happy, but Americans have spent too long working more and getting less in return,” he said.
Unions hailed the move, with Mary Kay Henry, president of the Service Employees International Union calling a “step in the right direction for workers who deserve a raise.
“By making more people eligible for overtime pay, both workers and our economy will benefit,” she said. “When workers have more money to spend in their local communities, everybody wins.”
The White House says the order directs the Secretary of Labor to begin addressing overtime pay protections “to help make sure millions of workers are paid a fair wage for a hard day's work and rules are simplified for employers and workers alike.”
The administration says that overtime rules that establish a 40-hour workweek have eroded over the years, leaving “millions of salaried workers” without overtime.
It says that a convenience store manager, a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more without making overtime pay.
Oertime and minimum wage rules are set in the Fair Labor Standards Act, originally passed by Congress in 1938, and apply broadly to private-sector workers. But the White House says there are exceptions to the rules, which the labor department has the authority to define. One of the most commonly used exemptions is for “executive, administrative and professional” employees, the so-called “white collar” exemption, the White House says.
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. The threshold has failed to keep up with inflation, the White House said, only being updated twice in the last 40 years.
In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week. it was raised in 2004 to $455 per week (the equivalent of $561 in today's dollars). That’s below today’s poverty line for a worker supporting a family of four.
The White House estimates that 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975).
The presidential order instructs the labor secretary to update regulations regarding who qualifies for overtime protection. And he’s to consider how the regulations could be revised to address the changing nature of the American workplace and simplify overtime rules to make them easier for workers and businesses to understand.