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Obama Administration Releases New Overtime Pay Rules


The Obama administration has just released a new rule that could provide a pay raise for millions of American workers. The rule says salaried workers who make less than about $47,000 a year must be paid overtime when they work more than 40 hours a week. While the new regulation comes as a victory to employees, it's a blow to many business groups that find the change too drastic.

For more on what this means, we're joined by NPR's Scott Horsley. And Scott, first just tell us how this rule came about.

SCOTT HORSLEY, BYLINE: Well, Audie, it's been a long time in coming. More than two years ago, President Obama ordered the Labor Department to take a look at this new deal-era law that regulates overtime pay. As recently as 1970, more than 60 percent of salaried workers were eligible for time-and-a-half pay when they worked more than 40 hours a week, but over time, that standard slipped. An exemption that was intended for highly paid executives gradually expanded to include a lot of lower-paid salary workers.

So you got to the point where you had fast food supervisors and retail store managers who are making as little as $24,000 a year working 50 and 60 hours a week and not getting overtime. So this rule will change that. It basically doubles the income threshold under which you have to get overtime when you work extra hours, and it also says going forward, that threshold will be adjusted automatically every three years to keep pace with inflation.

CORNISH: So you mentioned some service sector workers, but who else will be affected by this rule?

HORSLEY: Well, the Labor Department estimates there are some 4.2 million salaried workers who will be directly affected. That's people who make between the current threshold of about $24,000 a year and less than the new threshold. In addition, there are millions of other workers who are already technically eligible for overtime but who might not be getting time and a half. They may get a pay raise as well thanks to a new awareness of the rule.

And what's more, some employers may decide that rather than paying their managers time and a half to work more than 40 hours a week, they'd rather pay someone else straight time to work those extra hours. So you could see some part-time workers getting extra hours out of this or other people getting brand new jobs as a result of this rule.

CORNISH: But what are employers saying about the new rule? What will they do about it?

HORSLEY: There are some employers who say they welcome the change. Vice President Biden is traveling to Columbus, Ohio, tomorrow to visit an ice cream shop with one of those encouraging bosses. Others, though, are not happy with this change. The National Retail Federation complains that the Labor Department rushed the rule and that the new threshold is much too high.

Actually, when a draft proposal came out last summer, the Labor Department was considering an even higher threshold of about $50,000 a year. They backed that down a bit to take into account wages in some lower-wage parts of the country. Other employers say this new rule could mean less flexibility for salaried workers who may have to clock in and out in order to keep track of their hours now.

CORNISH: And what's Congress got to say about this rule from the Obama administration?

HORSLEY: Well, you know, unlike, say, the president's push to raise the minimum wage, this is a change the White House can make on its own. In fact, this may be one of the most potent levers the administration has as it tries to confront stagnant wages.

Unhappy employers are pushing Congress to put the brakes on this Labor Department rule, and there are bills pending on Capitol Hill that would do just that. Any effort by lawmakers to block the administration rule would face an almost-certain veto by President Obama, though. And I don't think there's a two-thirds majority in Congress to overturn this regulation.

CORNISH: That's NPR's Scott Horsley. Scott, thanks.

HORSLEY: It's my pleasure, Audie. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.