As part of his plan to tackle income inequality, President Obama announced that Thursday he would order Labor Secretary Thomas E. Perez to raise the pay threshold, and modify the terms of the white collar exemption that businesses use to limit overtime pay for workers. The president faces stiff opposition to his economic policies in the Republican lead House of Representatives, so he is acting under the authority granted by the Fair Labor Standards Act, which Congress passed in 1938.
As Obama said in his State of the Union Address “Wherever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do.”
A decade ago, President George W. Bush set an income level of $455 per week as what determines a white-collar worker when it comes to overtime pay. Companies are not compelled to pay time-and-a half wages for anybody working more than forty hours a week whose salary exceeds $23,660 a year. The dollar amount hasn’t been adjusted for inflation since. “Right now, it’s ridiculously low,” said Catherine Ruckelshaus, legal co-director of the National Employment Law Project.
Additionally, the president is ordering a modification of the rule that lets companies deny overtime to people declared to be executives. White House officials said those regulations were often abused. Simply naming a restaurant worker an assistant manager would prevent him from qualifying for overtime, even if he spends most of his time manning a cash register. The president wants a specific percentage of supervisory work to be defined for exempt employees as part of the new labor regulations.
Obama’s overtime order is opposed by business
“We understand the administration is looking for ways to put more money in people’s pockets, but the only way to do this is to grow the economy and create more jobs,” said Marc Freedman, executive director of labor law policy for the Chamber of Commerce. “Adding more burdens to employers will not accomplish that goal.”
“We are concerned that, at the levels being discussed, this would have a severe impact on employment and the economy,” said Mike Aitken, vice president of government affairs for the Society for Human Resource Management.
In the last 30 years, corporate profits have climbed, attaining a post-World War II record share of the economy. Since the recession officially ended in mid-2009, profits of the companies in the Standard and Poor’s 500 index have doubled. Workers have faced a different fate: their wages have stagnated. The recent expansion has left many of them behind, while 10 million people remain unemployed. In 2012 the workers’ share of the gross domestic income dropped to a record low, just 42.5 percent.
No pay threshold for the new rules nor supervisory percentage have been established yet. Both will be set by the Labor Department after a period of public comments. The Economic Policy Institute wants the threshold set at $961.54 a week. According to Ross Eisenbrey, the institute’s Vice President, “About 10 million workers could benefit from a rule that makes clear that anyone earning less than $50,000 a year is not exempt from overtime requirements … [it] will not only help employees who work hard get ahead, it will also provide a boost to the economy by putting money into the pockets of workers who are likely to spend it”
With Obama’s job approval rating sinking to a new low in Wednesday’s NBC/Wall Street Journal poll, the president is trying to distinguish Democrats as the champions of working men and women before the mid-term election. If Tuesday’s special congressional election victory by Republican David Jolly is any indication, Obama is facing stiff headwinds in his attempt to retain a Democratic majority in the Senate so that he doesn’t tread water as a lame duck for the remainder of his second term.