The US Department of Labor will propose extending overtime pay to nearly 5 million workers, President Obama announced yesterday. The proposal guarantees overtime pay to most salaried workers earning less than an estimated $50,440 next year. The current salary threshold — which guarantees overtime for most salaried workers who fall below it — is $23,660, or $455 per week, and only 8% of full-time salaried workers fall below it, according to the White House.
“While this will add costs for many employers, the possibility that employers may reduce the hours of salaried workers to avoid the 40-hour threshold, may lead to greater demand for temporary workers,” said Fiona Coombe, Staffing Industry Analysts’ director of legal and regulatory research.
The U.S. Chamber of Commerce opposes the proposal.
“Making more employees eligible for overtime by severely restricting the exemptions will not guarantee more income, but instead will negatively impact small businesses and drastically limit employment opportunities,” said Randy Johnson, the chamber’s senior VP of labor, immigration, and employee benefits, in a statement. “Additionally, many reclassified employees will lose benefits, flexibility, status, and opportunities for advancement. This change is another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact.”
According to a release from the White House office of the press secretary, the Department of Labor’s proposal would:
Raise the threshold under which most salaried workers are guaranteed overtime to equal the 40th percentile of weekly earnings for full-time salaried workers. As proposed, this would raise the salary threshold from $455 a week ($23,660 a year) — below the poverty threshold for a family of four — to a projected level of $970 a week ($50,440 a year) in 2016.
- Extend overtime pay and the minimum wage to nearly 5 million workers within the first year of its implementation, of which 56% are women and 53% have at least a college degree.
- Provide greater clarity for millions more workers so they — and their employers — can determine more easily if they should be receiving overtime pay.
- Prevent future erosion of overtime and ensure greater predictability by automatically updating the salary threshold based on inflation or wage growth over time.
