Last time, our blog took a closer look at what both state law and federal law had to say regarding the payment of overtime, examining how it is calculated, as well as which employers are bound to pay it and which employees are exempt from it.
In keeping with this theme, today’s post will discuss how and why President Obama has recently proposed a dramatic change to the federal rules governing the payment of overtime.
As drafted, the federal rules currently dictate that businesses must pay overtime — i.e., one-and-a-half times the pay rate — to employees who work over 40 hours in a given workweek and earn less than $23,660 per year.
Under the President’s proposal to the U.S. Department of Labor, however, this income threshold for the mandatory payment of overtime would rise to $50,440, a move that the Obama Administration says would help roughly 5 million Americans, including 90,000 workers right here in Minnesota.
Administration officials are arguing that the move is necessary in the post-recession economy, which has seen both low unemployment rates and sustained growth, but also little wage growth. Indeed, they argue the measure would provide a much-needed income increase to those middle class employees who are not seeing more money despite working longer hours.
As you can imagine, the overtime proposal has generated significant controversy.
Proponents argue that such a move is logical given that overtime rules have not kept pace with inflation, such that that only 8 percent of workers are currently covered by federal overtime protections. They also point out that such a measure could counteract the growing disparity between wealth distribution and wage growth.
Critics, however, have argued that the measure could not only stifle the growth of small businesses, but also lead to companies hiring fewer people in order to offset the added expense. Furthermore, they contend that such a move would cause many employers to reform their benefits packages to the disadvantage of current employees.
Only time will tell if the Labor Department decides to adopt the President’s overtime proposal. Stay tuned for developments, and be certain to speak with an experienced legal professional if you have any concerns about your employer violating wage and hour laws.