Proposed expansion of overtime benefits expected to take effect in 2016

posted on:
July 1, 2015

author:
Kurt Niland

Millions of Americans earning salaries of less than $50,400 per year will be entitled to overtime pay under a new plan the U.S. Department of Labor and the Obama Administration will propose next week as part of a nationwide effort to address rising income inequality and rebuild the eroding middle class.

For years, American workers have had to work longer hours for lower pay that hasn’t kept pace with inflation. Under the current rules, implemented by President George W. Bush in 2004, salaried workers must earn less than $455 per week, or $23,600 per year, to be eligible for overtime pay.

Raising the overtime salary threshold to $970 per week , or $50,400 per year, would boost the incomes of about five million American workers.

The plan aims to restore healthy overtime protections that American workers generally haven’t seen in decades. Today, only 12 percent of salaried workers are below the threshold and qualify for overtime pay. In 2004, 18 percent of salaried workers were entitled to overtime. The threshold has been constricting since 1975, when 65 percent of salaried workers were eligible for time-and-a-half pay for every hour of overtime.

Under the new rule, the threshold level would be tied to wage growth or inflation to preserve buying power for the middle class.

“Right now, too many Americans are working long days for less pay than they deserve,” President Obama wrote in an op-ed published in the Huffington Post Monday.

The President also said that the change is “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.

“That’s how America should do business,” President Obama added. “In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.”

The proposed rule doesn’t need Congressional approval to go into effect, but it and other regulatory changes must undergo a public-comment period before they are polished into new rules and take effect. President Obama signed an executive order last year directing the Labor Department to revise the overtime rules, which would take effect next year.

The planned changes are already being slammed by corporate lobbyists who assert the rules will hurt profits and restrict growth at a time when the economy is slowly expanding. Business interests attacking the proposed changes say companies will be forced to scale back on hours or staff to afford the extra costs.

Sources:
Huffington Post
Huffington Post – OpEd
Wall Street Journal

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