Using his executive authority, President Obama will update labor regulations that dictate which workers are exempt from the requirement that their employers pay time and a half for working more than 40 hours a week, the New York Times reports.
Under current rules, workers can be classified as executive, administrative, or professional and denied overtime pay under what is known as the white-collar exemption. That means someone who oversees a clean up crew can be classified as executive and not be paid time and a half for extra work. Obama’s change would readjust the rules for which salaried employees can be blocked in this way.
It would also significantly raise the salary threshold that currently stands at $455 a week, or $23,660 a year, meaning anyone who makes more than that is exempt from overtime. That threshold hasn’t been significantly updated since 1975, allowing it to erode as inflation rose. In a paper released earlier this year, the Economic Policy Institute estimated that if that threshold were raised to $970 a week, covering those who make $50,440 or less a year, about 10 million salaried workers would get overtime pay for going over 40 weekly hours. “These workers include insurance clerks, secretaries, low-level managers, social workers, bookkeepers, dispatchers, sales and marketing assistants, and employees in scores of other occupations,” the report notes. That threshold is also where it would be if it had been adjusted for inflation since the last significant increase.
Obama’s proposed changes will be subject to public comment before getting a final sign off from the Department of Labor, so they could be scaled back in the face of strong opposition.
The change would bring a welcome boost in income for workers, who have suffered a decade of stagnant or falling wages despite rising productivity. Their wages are currently growing at the slowest rate since 1965 and they have declined 7 percent since 2007. Meanwhile, corporate profits have been robust, rising 20 percent between 2008 and 2013 and hitting an all-time high in 2012.
It could also have an impact on the standard workweek. Americans work long hours, standing at number 11 in how many hours clocked each year out of 33 developed countries, ahead of Japan, Germany, and other competitive peers. Ninety-four percent of today’s professionals put in 50 or more hours a week, and nearly half are working 65 plus. If employers want to avoid paying workers who are newly covered by overtime regulations the time and a half pay, they could cap hours at 40 a week and instead hire more people to do the extra work.
Obama’s authority to update the rules comes from a president’s ability to revise the Fair Labor Standards Act, which governs such labor regulations as overtime. President George W. Bush and other presidents have used similar strategies in the past. And despite some saying that using this authority is an abuse of power, Obama is actually far below the average when it comes to the use of executive orders and is issuing them at the slowest rate since President Grover Cleveland.