The President’s Proposal: Increasing Overtime Pay for Salaried Workers

Nearly 5 million white collar workers who make more than $23,660 a year are not eligible for overtime pay. This includes convenience store managers, fast food assistant managers, or office workers who may be expected to work overtime, yet receive no compensation for the extra time. But under a proposal by President Obama, this would soon change. Obama hopes to double the current salary threshold for overtime pay for salaried workers by 2016.

The U.S. Department of Labor announced last month a proposed rule that would extend overtime protections to salaried workers by raising the salary threshold under which most white collar salaried workers are eligible to receive overtime pay from $455 a week—or $23,660 a year—to an estimated $970 a week—or $50,440 a year—by next year. As a part of the rule, the Labor Department intends to index a salary basis test annually by either tying it to the increase in the consumer price index for urban consumers or by maintaining the salary basis at the 40th percentile of weekly earnings for all full-time salaried workers.

In a Huffington Post article, Obama wrote that “too many Americans are working long days for less pay than they deserve. That's partly because we've failed to update overtime regulations for years–and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year–no matter how many hours they work.”

Supporters of the rule say the salary threshold rate has not increased in decades and that the new rule will re-establish the salary threshold to what it was in 1975 in terms of purchasing power.

“The 40-hour work week is the cornerstone of middle-class life in America,” said U.S. House Minority Leader Nancy Pelosi of California in a June press release. “These renewed overtime pay protections reaffirm America’s respect for a full day’s work. They will ensure that workers in every field and every industry are afforded the respect of wages that recognize the hard, long hours that so many give their companies.”

Opponents of the proposed rule point to the fact that this rule would double the current salary basis in a single year, with little time for transition. The International Public Management Association for Human Resources conducted a survey that showed a majority of its members preferred a lower salary basis with an incremental increase in the threshold.

For states, this ruling could have a significant impact on budgets. According to the U.S. Census Bureau, state governments employed nearly 5.3 million people in 2013, the majority of whom are full-time employees. The salaries of all state and local government employees are part of an overall compensation system within their respective agencies. This means that an increase in salary for some employees in order to meet a new salary basis would have a ripple effect throughout the entire governmental entity, making it much more difficult for a state government to balance its budget.

In addition, the public sector has not fully recovered from the Great Recession, and some opponents argue that state and local governments still dealing with the lingering effects of the recession could find it difficult to increase salaries or pay for additional overtime.
Speaker of the House John Boehner of Ohio believes the proposed rule change would have little impact on economic growth and would provide a disincentive for companies to hire more workers.

“If you don’t have a job, you don’t qualify for overtime. So what do you get out of it? You get nothing," Boehner told the Washington Post. "The president’s policies are making it difficult for employers to expand employment. And until the president’s policies get out of the way, employers are going to continue to sit on their hands.”

The Department of Labor’s request for public comments on the proposed rule closed earlier this month after receiving nearly 146,000 comments. Unlike the president’s proposal to increase the federal minimum wage to $10.10 an hour, extending overtime pay for salaried workers would not require congressional legislation. The department is expected to issue its final rule later this year with the goal of implementing the change at the beginning of 2016.