March 12, 2014 / 10:27 PM / 6 years ago

Obama to seek broad update to U.S. rules for overtime pay

WASHINGTON (Reuters) - President Barack Obama will seek to help workers by updating regulations that exempt broad swaths of salaried workers from earning overtime wages, a White House official said on Wednesday.

U.S. President Barack Obama speaks to female members of Congress about his administration's minimum wage efforts in the Roosevelt Room at the White House in Washington, March 12, 2014. (From L to R) Senior White House adviser Valerie Jarrett, House Minority Leader Nancy Pelosi, Obama, and Sen. Patty Murray. REUTERS/Larry Downing

Obama on Thursday will direct the U.S. Labor Department to look at overtime regulations and the salary threshold above which employers are not required to pay overtime for employees deemed to be managers and supervisors, said the official.

The threshold was last raised in 2004 to $455 per week, less than half of what it was almost 40 years ago on an inflation-adjusted basis.

Obama’s move would bypass Congress through use of executive authority to review the country’s overtime rules. It was part of a series of populist measures he was promoting ahead of the November midterm elections as Democrats try to appeal to voters and keep control of the Senate.

The anticipated proposal could have an immediate impact on the retail and fast-food industries, possibly making salaried restaurant managers and store supervisors eligible for overtime pay unless their salaries go up or their hours are reduced.

Low-level supervisors in healthcare facilities, such as hospital clerks and dietary directors, also could become eligible for overtime wages, experts said.

A salaried employee earning $455 for a workweek of 63 hours or more makes less than the federal minimum wage.

“The president believes that if you’re making $25,000 a year and you’re working 60 hours a week, you should be getting paid for the extra hours you work,” Betsey Stevenson, a member of Obama’s Council of Economic Advisers, told reporters.

California had a higher threshold of $640 per week and was set to boost that to $800 per week in 2016, while New York’s threshold was at $600 per week and will increase to $675 per week in 2016, the White House official noted.


Business groups were quick to criticize the announcement as a move that could lead to job or wage losses if employers cut hours or eliminate positions.

“If implemented, this would have a significant job-killing effect,” said the National Retail Federation’s David French in a statement. “We are skeptical of the politics of the proposal and certainly of the timing.”

The National Retail Federation is a trade association that represents department stories, grocers, chain restaurants and Internet retailers.

Obama and Democratic lawmakers were campaigning to boost the minimum wage to $10.10 per hour from $7.25, a measure that stands little chance of passing through Congress. He used an executive order in February to raise the minimum hourly wage of federal government contractors to that amount.

The president also had tried to urge Congress to extend unemployment insurance benefits for people out of work for extended periods.

Obama met with House and Senate lawmakers on Wednesday to discuss the minimum wage, equal pay, paid family leave and child care, the White House said. The gender wage gap will be the subject of a June summit hosted by the president.

Experts said the president had authority to revise overtime standards without congressional support. The Fair Labor Standards Act, the country’s wage-and-hour law, gave the U.S. labor secretary the power to revise and update overtime regulations.

“There is no question that they have the power through rulemaking to do this,” said Ross Eisenbrey, vice president at the liberal-leaning Economic Policy Institute in Washington, D.C.


Eisenbrey, with his colleague Jared Bernstein, a former economic adviser to Vice President Joe Biden, urged the White House last year to consider raising the salary threshold at which certain categories of so-called managerial employees are no longer eligible for overtime pay.

Eisenbrey said that based on inflation, the 1963 salary threshold was $998 in 2014 dollars; the 1970 threshold was $1,071 in 2014, and the 1975 threshold was $984 in 2014 dollars.

“Then we went 29 years without an adjustment,” he said in an interview.

Eisenbrey and Bernstein urged the White House to consider raising the threshold to $984, the inflation-adjusted figure in place under Republican President Gerald Ford.

If a new overtime rule is proposed, the Labor Department will notify the public, set public comment period and likely hold a hearing. The department will review the public comments before issuing a final regulation.

Eisenbrey predicted the process could take 12 to 18 months.

Littler Mendelson attorney Tammy McCutchen oversaw the last round of changes to overtime rules in 2004 during the administration of Republican President George W. Bush. She said in an interview that the administration faced “a lot of opposition” but “managed to get them finalized.”

“The most corporations can hope for is to actively engage in the comment period and contain the worst ideas,” McCutchen said.

Additional reporting by Susan Heavey and Carlyn Kolker in New York; Editing by Kevin Drawbaugh

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