Obama to make 5mn more Americans eligible for overtime pay

U.S. President Barack Obama (Reuters / Gary Cameron)
The Obama administration has announced new rules that will boost the salary threshold for time-and-a-half overtime pay from the current $23,660 to $50,440.

Any worker who makes as much or below the new total and works 40 hours a week will automatically qualify, according to US Department of Labor guidance.

“Right now, too many Americans are working long days for less pay than they deserve,” President Barack Obama wrote in a Huffington Post Op-Ed announcing the change.

The regulatory change restores the overtime salary threshold to approximately where it was in 1975, based on inflation adjustments.

US Labor Secretary Thomas Perez said that the rule change will result in a collective $1.2 billion in extra compensation for workers who are newly eligible for overtime pay.

The rule changes also address the total annual compensation a worker can make to avoid being considered a highly compensated employee. The changes boost that amount to $122,148 a year for a full-time salary worker.

“This week, I'll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year," Obama wrote in the Op-Ed. "That's good for workers who want fair pay, and it's good for business owners who are already paying their employees what they deserve ‒ since those who are doing right by their employees are undercut by competitors who aren't."

The rule change is facing backlash from conservatives and business lobbies. The National Retail Federation said that increased overtime will “add to employers’ costs, undermine customer service, hinder productivity, generate more litigation opportunities for trial lawyers and ultimately harm job creation.”

Opponents are expected to challenge the plan in court or in Congress, which could unravel the rule change via appropriations measures, according to the New York Times.

“Supporters of these regulations say they want to increase Americans’ take-home pay, but these sweeping changes to the rules could mean anything but," Angelo Amador, senior vice president of labor and workforce policy at the National Restaurant Association, said in a statement.

Cecilia Muñoz, White House director of the Domestic Policy Council, said the rule changes are “totally within the [Labor] Department’s regulatory authority."

“We believe we have more than sufficient support for the rule to go final and be implemented," she said, according to ThinkProgress.

Democratic presidential candidates Hillary Clinton and Bernie Sanders praised the decision on social media. Fellow aspirant Martin O'Malley, former governor of Maryland, has previously called for a change to overtime-pay regulations.

The proposal will be subject to a 60-day comment period once it is officially filed in the Federal Register.

The rule change comes following an executive order Obama announced in March, in which the administration pledged to update overtime laws in the Fair Labor Standards Act.

If the rule is finally enacted, economists think employers will scale back employee hours to avoid overtime pay, the New York Times reported.