WASHINGTON — The White House unveiled a new overtime rule Tuesday night that will double the salary threshold of workers eligible for overtime pay to $47,476 a year, a move that sparked an immediate outcry from retailers.
The Obama administration has argued repeatedly that the salary threshold was below today’s poverty line for a worker supporting a family of four.
The Labor Department’s new overtime regulation will take effect on Dec. 1 and it is expected to expand overtime pay and protection to an estimated 4.2 million new workers who are currently not eligible under federal law. It is also expected to boost wages for workers by $12 billion over the next 10 years, according to the White House. The threshold will be tied to an index of salary growth.
“The bottom line here is that the overtime rule we are announcing here today we think is consequential,” said Vice President Joe Biden on a call with reporters. “It is the defining issue of our time — that is restoring and expanding access to the middle class. The middle class has been getting clobbered although I think we are making real progress here.”
Biden said overtime protections have been weakened for the past 40 years.
“In 1975, 62 percent of workers automatically qualified for overtime,” he said. “Today, that’s 7 percent. That’s not a mistake — 65 to 7 [percent] and you wonder why the middle class is struggling.”
Under the Fair Labor Standards Act, hourly wage workers are generally paid time and a half for more than 40 hours a week if they earn below a certain salary, but a white-collar exemption prevents many salaried executives, managers, supervisors and administrators from receiving overtime, according to the administration. The threshold for overtime eligibility was set at $455 a week, or about $23,660 a year, in 2004.
“All hourly workers, regardless of how much they get paid will automatically qualify for overtime. That won’t change,” Biden explained. “But right now if you are a salaried worker, you’re only guaranteed overtime if you make less than $23,660 a year. For millions of Americans whose companies label them a manager or a supervisor…after putting in 50, 60 or 70 hours a week, they don’t see an extra dime in their paycheck for all of that overtime.”
He said companies will have a choice: They can either pay workers overtime for hours worked above 40 hours a week, or they can cap the hours of a salaried worker making below $47,476.
Labor Secretary Tom Perez said: “Today’s announcement will go a long way to restoring the luster of the crown jewel of overtime protection.”
“The white-collar exemption was intended to be a narrow exemption applying only to highly paid workers with better benefits, more job security and greater upward mobility, not entry-level office workers or retail supervisors spending most of their day on the cash register. As a result today, far too few people are eligible for overtime pay,” Perez said. “If you spend 99 percent of your time at work stocking shelves, working 60 hours a week and making $25,000 a year, it’s simply not right that you don’t receive overtime pay. That’s an economy out of balance.”
Perez said the new overtime threshold of $47,476 a year amounts to $913 a week. It will be indexed to salary growth and by 2020, official expect the salary threshold to be “well over” $51,000 a year, Perez said.
But the National Retail Federation immediately condemned the rule before it was even made public.
“These rules are a career killer,” declared David French, senior vice president for government relations at the NRF. “In the retail sector alone, hundreds of thousands of career professionals will lose their status as salaried employees and find themselves reclassified as hourly workers, depriving them of the workplace flexibility and other benefits they so highly value.”
He said overtime regulations should be “sensitive to cost-of-living differences throughout the country, moderate enough that they don’t block the career ambitions of young people and middle managers working to climb the career ladder, and gradual enough that business owners can implement them without penalizing the very people they were intended to help.”