Beginning Wednesday (May 18), the Department of Labor will expand overtime pay to millions of American workers, President Barack Obama announced in an email and video message from the White House late Tuesday evening.
“Tomorrow, we’re strengthening our overtime pay rules to make sure millions of Americans’ hard work is rewarded. If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones. It’s one of most important steps we’re taking to help grow middle-class wages and put $12 billion more dollars in the pockets of hardworking Americans over the next 10 years,” President Obama said in the message. (See the video explainer at the end of this story.)
In total, the new rule is expected to extend overtime protections to 4.2 million more Americans who are not eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years. Obama said millions of Americans who work more than 40 hours each week will now receive the overtime pay they have earned.
“For generations, overtime protections have meant that an honest day’s work should get a fair day’s pay, and that’s helped American workers climb the ladder of success. That’s what middle-class economics are all about. But after years of inflation and lobbyists’ efforts to weaken overtime protections, that security has eroded for too many families,” the president said.
The new rules, however, are not without controversy. In July 2015, when the Department of Labor published the proposed rules, several industry groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, lambasted the proposed rules as “counterproductive” to high-paying, good jobs and employment growth.
The Department published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on July 6, 2015 and invited interested parties to submit written comments on the proposed rule at by September 4, 2015. The Labor Department said it received more than 270,000 comments in response to the NPRM from a variety of interested stakeholders.
According to DOL Secretary Thomas Perez, the final rule sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region in the South at $913 per week, or $47,476 annually for a full-year worker, up 100% from the previous baseline of $455 per week or $23,660 a year. The Obama administration had first proposed that the standard salary level be set at $50,440.
The new rules also set the total annual compensation requirement for highly compensated employees (HCE) subject to a to the annual equivalent of the 90th percentile of full-time salaried workers nationally at $134,000, up previously from $100,000. The initial increases to the standard salary level and HCE total annual compensation will be effective on Dec. 1, 2016. Future automatic to those thresholds that are part of the new rules will occur every three years, beginning on January 1, 2020.
ARKANSAS LABOR CHIEF PRAISES NEW RULES
Arkansas AFL-CIO President Alan Hughes calls the new overtime rules an important first step to guarantee overtime protections to millions more working people by raising the salary threshold for overtime protections. In Arkansas, Hughes said that means “conservatively” that about 50,000 Arkansans would be guaranteed overtime protection according to the Department of Labor.
“We are proud of President Obama taking this important step and we think it needed to be done and will help double the salaries of some workers,” Hughes said Tuesday morning. “This not helps Arkansas workers, but this extra money in their pocket will also be put right back into the Arkansas economy. Sone of our workers live from paycheck to paycheck and this is a step back to where the (overtime rules) ought to be.”
Randy Zook, president and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, said the new rules will have “unintended consequences” when the Labor Department released its final proposal last year.
“If the intent is to help the middle class, this is a foolish way to do it,” Zook said. “Once again, unintended consequences will produce an unexpected – and undesirable – outcome.”
OPPONENTS SAY RULES ARE A ‘CAREER KILLER’
On Tuesday evening, as word leaked out that the Labor Department’s new federal overtime rules would going into effect today, several industry groups across a number of sectors lambasted the president’s overtime mandate.
The National Council of Chain Restaurants (NCCR) issued the following statement from Executive Director Rob Green strongly objecting to the Labor Department’s new federal overtime regulations: “By dramatically increasing the wage threshold for determining a restaurant manager’s overtime eligibility, key management positions will be eliminated, restaurant employee career advancement will be derailed and workplace morale will plummet,” Green said.
Green said NCCR will work with Congress to try and make the Labor Department “go back to the drawing board to find a workable solution.”
“If this outrageous regulation remains unchanged, chain restaurants will be forced to convert tens of thousands of managers from being salaried professionals to hourly status in order to avoid costly and unpredictable impacts. Restaurant owners across the country are asking why the federal government wants to take a salary away from restaurant managers,” Green said.
The National Retail Federation, the world’s largest retail trade group, called the new overtime rules a “career killer.”
“With the stroke of a pen, the Labor Department is demoting millions of workers,” said David French, NCR’s vice president of government relations. “In the retail sector along, hundreds of thousands of career professionals will lose their status as salaried employees find themselves reclassified as hour workers, depriving them of workplace flexibility and other benefits they so highly-value. And the one-size-fits-all approach means businesses trying to make ends meet in small towns across America are now expected to pay the same salaries as those in New York City.”