WASHINGTON — President Obama this week will seek to force
American businesses to pay more overtime to millions of workers, the latest
move by his administration to confront corporations that have had soaring
profits even as wages have stagnated.
On Thursday, the president will direct the Labor Department
to revamp its regulations to require overtime pay for several million
additional fast-food managers, loan officers, computer technicians and others
whom many businesses currently classify as “executive or professional”
employees to avoid paying them overtime, according to White House officials
briefed on the announcement.
Mr. Obama’s decision to use his executive authority to
change the nation’s overtime rules is likely to be seen as a challenge to
Republicans in Congress, who have already blocked most of the president’s
economic agenda and have said they intend to fight his proposal to raise the
federal minimum wage to $10.10 per hour from $7.25.
Mr. Obama’s action is certain to anger the business lobby in
Washington, which has long fought for maximum flexibility for companies in
paying overtime.
Cecilia Muñoz, the director of the White House Domestic
Policy Council, said the overtime expansion is a way “to fix the system so
folks working hard are getting compensated fairly. That’s why we are
jump-starting this effort.” Credit Alex Wong/Getty Images
In 2004, business groups persuaded President George W.
Bush’s administration to allow them greater latitude on exempting salaried
white-collar workers from overtime pay, even as organized labor objected.
Conservatives criticized Mr. Obama’s impending action.
“There’s no such thing as a free lunch,” said Daniel Mitchell, a senior fellow
with the Cato Institute, who warned that employers might cut pay or use fewer
workers. “If they push through something to make a certain class of workers
more expensive, something will happen to adjust.”
Marc Freedman, the executive director of labor law policy
for the U.S. Chamber of Commerce, said the nation’s overtime regulations
“affect a very wide cross section of employers and our members.”
“I expect this is an area we will be very much engaged in,”
Mr. Freedman said.
Mr. Obama’s authority to act comes from his ability as
president to revise the rules that carry out the Fair Labor Standards Act,
which Congress originally passed in 1938. Mr. Bush and previous presidents used
similar tactics at times to work around opponents in Congress.
The proposed new regulations would increase the number of
people who qualify for overtime and continue Mr. Obama’s fight against what he
says is a crisis of economic inequality in the country. Changes to the
regulations will be subject to public comment before final approval by the
Labor Department, and it is possible that strong opposition could cause Mr.
Obama to scale back his proposal.
Cecilia Muñoz, the director of the White House Domestic
Policy Council, said the effort was part of Mr. Obama’s pledge to help workers
thrive. “We need to fix the system so folks working hard are getting
compensated fairly,” she said on Tuesday evening. “That’s why we are
jump-starting this effort.”
The overtime action by Mr. Obama is part of a broader
election-year effort by the White House to try to convince voters that
Democrats are looking out for the middle class. White House officials hope the
focus on lifting workers’ pay will translate into support for Democratic
congressional candidates this fall.
Since the mid-1980s, corporate profits have soared, reaching
a post-World War II record as a share of economic output. The profits of the
companies in the Standard & Poor’s 500 have doubled since the recession
ended in June 2009, but wages have stagnated for a vast majority of workers in
the same period. Recently, workers’ wages fell close to an all-time low as a
share of the economy.
In 2012, the share of the gross domestic income that went to
workers fell to 42.6 percent, the lowest on record.
Under current federal regulations, workers who are deemed
executive, administrative or professional employees can be denied overtime pay
under a so-called white-collar exemption.
Under the new rules that Mr. Obama is seeking, fewer
salaried employees could be blocked from receiving overtime, a move that would
potentially shift billions of dollars’ worth of corporate income into the
pockets of workers. Currently, employers are prohibited from denying
time-and-a-half overtime pay to any salaried worker who makes less than $455
per week. Mr. Obama’s directive would significantly increase that salary level.
I work for a company that has been gleefully gaming the
system for years by classifying most of it's workers as "exempt" by
calling us...
In addition, Mr. Obama will try to change rules that allow
employers to define which workers are exempt from receiving overtime based on
the kind of work they perform. Under current rules, if an employer declares
that an employee’s primary responsibility is executive, such as overseeing a
cleanup crew, then that worker can be exempted from overtime.
White House officials said those rules were sometimes abused
by employers in an attempt to avoid paying overtime. The new rules could
require that employees perform a minimum percentage of “executive” work before
they can be exempted from qualifying for overtime pay.
“Under current rules, it literally means that you can spend
95 percent of the time sweeping floors and stocking shelves, and if you’re
responsible for supervising people 5 percent of the time, you can then be
considered executive and be exempt,” said Ross Eisenbrey, a vice president of
the Economic Policy Institute, a liberal research organization in Washington.
Jared Bernstein, the former chief economic adviser to Vice
President Joseph R. Biden Jr., and the former executive director of the White
House Task Force on the Middle Class, embraced Mr. Obama’s move.
“I think the intent of the rule change is to make sure that
people working overtime are fairly treated,” he said. “I think a potential side
effect is that you may see more hiring in order to avoid overtime costs, which
would be an awfully good thing right about now.”
Mr. Bernstein, now a senior fellow at the Center for Budget
and Policy Priorities, a liberal research group, and Mr. Eisenbrey wrote a
paper last year urging the administration to raise the salary threshold for
overtime to $984 a week. Their study estimated that in any given week, five
million workers earning more than the current threshold of $455 a week and less
than $1,000 a week are likely to be exempted from overtime. President Bush
raised the threshold to $455 in 2004.
Mr. Bernstein said, “Remember, inflation has eroded this
threshold a great deal over the years, so it’s hard to see why it’s unfair to
make that adjustment.”
White House officials said that in California an employer
cannot deny overtime pay to a salaried worker who makes less than $640 a week.
In New York, the threshold is $600 a week. Under recently passed laws, the
California threshold is set to rise to $800 per week in 2016, and the New York
threshold to $675.
If the changes to the overtime regulations are made, it will
fall to the Labor Department’s wage and hour administrator to put them into
effect. That position has been vacant since Mr. Obama took office. David Weil,
a professor at the Boston University School of Management, is the latest
nominee for the post. He is awaiting confirmation.
Source: NYTimes.com
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