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President Obama says the new overtime rules that he's proposing would effectively mean a raise for 5 million Americans. We begin this hour by learning how this plan would work and how employers are reacting to it. As NPR's Yuki Noguchi reports, the president's proposal would make bold changes to a Depression-era law.
YUKI NOGUCHI, BYLINE: The landmark Fair Labor Standards act passed in the late 1930s to address, among other things, concerns about the exploitation of blue-collar workers made to work more than the standard 40 hours a week without extra pay. To do that, the law distinguished blue-collar from white-collar work. Hourly workers were entitled to overtime pay versus those who were exempted from the overtime rules because they receive a high enough salary and the nature of their work is essentially managerial. But these days, drawing a clear line between blue-collar and white-collar, or, in legal terms, exempt work, is harder. The salary level that separates the two is $23,660 a year. If you make more than that, the law says in most cases, you were exempt, ineligible for overtime pay. The administration is now proposing to more than double that threshold to $50,440. And that means a whole new class of restaurant, store and bank branch managers may find themselves either getting a raise or shifted to being paid hourly and potentially getting paid time and a half for the extra hours they put in. Judy Conti is federal advocacy coordinator for the National Employment Law Project which advocates for lower-income workers.
JUDY CONTI: This is an exciting proposal for workers.
NOGUCHI: Conti says the low salary threshold has allowed employers to exempt many workers from overtime pay.
CONTI: And for those employers that choose to spread work among many instead of paying overtime to a few, that also means that we're going to see part-time workers getting jobs that are closer to full time, and we're going to see more jobs created for the unemployed.
NOGUCHI: But employers say more than doubling the salary threshold suddenly could hurt a broad swath of industry and create unintended consequences for workers as well.
JOHN THOMPSON: Oh, I think it will have widespread effect.
NOGUCHI: John Thompson is an attorney representing employers.
THOMPSON: It's going to affect a wide range of businesses and industries and by the way, not just private sector or for-profit, but also probably government employers, nonprofit employers. So a substantial increase in the salary to us is going to be a big deal.
NOGUCHI: Business groups like the National Retail Federation and Chamber of Commerce have cited concern about the high cost. But their objection isn't just over paying more for richer salaries or new overtime hours. The Obama administration is also seeking to define how much and what kind of work might qualify a worker for overtime. For example, if a store manager stocks inventory and works the cash register, in addition to handling schedules for hourly staff, at what point is that person doing enough blue-collar work to qualify for overtime pay? The administration will ask the public to weigh in on that question. Nancy Hammer is policy counsel for the Society for Human Resource Management which represents HR professionals.
NANCY HAMMER: My concern is if you have to track what types of duties employers are doing, it's going to affect both the employee and the employer in a negative way because I can tell you, I don't want to have to track what percentage of my time is spent making copies versus making decisions because I do those things every day.
NOGUCHI: She says workers may not like the rules either if employers have to impose strict rules about when their employees can work.
HAMMER: And that's going to come as a real shock to them because, as you know, if you're not exempt, you may lose out on some of the things you're used to - for example, workplace flexibility and some of the autonomy you have as an exempt employee.
NOGUCHI: The president called the proposed rules part of his top priority of strengthening the middle class. He plans to take his advocacy on the road to Wisconsin later this week. After more details are released, the proposal will be subject to a public comment period before a final version is adopted. Yuki Noguchi, NPR News. Transcript provided by NPR, Copyright NPR.
