Last Thursday, President Obama announced his directive to the Department of Labor to begin the process of revising federal regulations to expand the number of Americans eligible for overtime under Fair Labor Standards Act. He specifically targeted the “white collar” exemptions from overtime, including the administrative, executive, and professional exemptions. Currently, employers paying certain employees performing certain types of duties a weekly salary of $455 or more are not obligated to pay those employees overtime for hours worked in excess of 40, nor are they required to ensure those employees make at least minimum wage for each hour worked.
The specifics of the President’s proposal are not yet available, but experts expect the changes to target the weekly salary threshold, as well as possibly increasing the relative supervisory workload required to qualify as exempt under the executive exemption.
In press statements and fact sheets on whitehouse.gov, the President cited the failure of the white collar salary threshold to keep pace with inflation as evidence of the erosion of overtime and minimum wage protections for millions of Americans. Statements highlighted how workers now earning the minimum salary to qualify as exempt may fall below the poverty line, and may even fail to earn minimum wage for all hours worked in weeks where the log 65 work hours or more.
88% of salaried workers are now ineligible for overtime under the exemption, compared to only 35% when the exemption was created in 1975. In a follow up briefing, White House Council of Economic Advisers member Betsey Stevenson submitted that had the salary threshold stayed in line with inflation, 3.1 million more Americans would be eligible for overtime than is currently the case. Adjusted to today’s dollars, the original threshold of $250 set in 1975 would be about $970, more than twice its current level.
Opponents of the changes argue that this initiative ignores and potentially exacerbates the country’s larger problem, the inadequate growth of new jobs following a tepid recovery from the recent recession. They argue that the more employers have to pay existing employees, the fewer payroll dollars will be available for new hires. Some labor economists have countered this argument, explaining that the changes will encourage employers to reduce existing employees’ hours, creating demand for additional workers to cover the shortfall.
Opponents further criticize the President for circumventing Congress in what amounts to a major overhaul in federal overtime law. This point the President does not deny, even touting his willingness to use “his phone and his pen wherever he can” to accomplish his economic agenda aimed at American wages. This agenda also includes an increase of the minimum wage to $10.10 from $7.25, a change already applied to federal contractors via executive order, but which few expect to pass Congress in the near future.