Overtime Pay for Managers and Other Exempt Employees Coming?

OvertimeMillions of people regularly work more than 8 hours a day or 40 hours a week and do not earn overtime pay because they are either managers, earn more than $455 a week or are in some other professional position labeled as “exempt.” That is likely to change shortly, when the U.S. Department of Labor announces new rules believed to be coming on Tuesday that will allow managers and other exempt employees to earn overtime pay in the future.

Under current federal regulations, workers making more than $23,660 are not guaranteed overtime. Their eligibility for overtime pay is dependent on the specific position, its autonomy and other factors tied to the Fair Labor Standards Act.

Under the expected change, the Labor Department plans to raise the salary level to $970 a week, which is more than $50,000 per year. The move will give an estimated 5 to 15 million workers (by some accounts, 8 to 12 percent of salaried workers) a boost in pay, which will help alleviate pay eroded by inflation for many.

Critics of the pending change have been assessing the costs and trying to determine the impact on their businesses before even knowing the details. One national restaurant chain has estimated that the change would affect 400 of their managers, who earn more than the current threshold. The company has estimated that, without a change in staffing or required tasks, the change could cost up to $12 million a year in compensation.

One issue that has confused eligibility for overtime has been the definition of a “manager.” The definition is ambiguous for restaurant or retail workers who may technically supervise others, but spend most of their time doing manual labor or serving customers. Under 2004 rules, exempt employees must supervise at least two other workers and “management” must be their primary duty, but there is no requirement on the amount of time spent on management tasks. California, by contrast, stipulates that over 50 percent of an employee’s time must be spent on management duties to be exempt from overtime pay. It is believed that the Labor Department is going to propose a new regulatory definition of a “manager,” too.

The distinction between managers and staff is an important one going forward. The National Retail Federation, a trade organization that represents retailers, noted that retailers would likely avoid paying overtime by hiring more lower-paid part-time staff instead of full-time sometime-supervisory employees. “If the stated goal of the administration is the pathway to the middle class it makes no sense to have regulation that would eliminate managerial positions and supervisory positions and replace them with part time and hourly,” David French, the organization’s senior vice president of government relations, told TIME.

Those in the pay levels for managers and other exempt employees expected to now be eligible for overtime should not plan on the fatter wallet coming any time soon, however. The release of the rule will be followed by a regulatory period allowing comment on the proposed change, which are sure to elevate the rhetoric between the business groups against unions and administration representatives.

Written and edited by Dyanne Weiss

Wall Street Journal: Labor Department Expected to Make Millions More Eligible for Overtime
TIME: Millions More Americans Will Qualify for Overtime
TIME: Will New Overtime Rule Create—or Cost—Jobs?
Bloomberg: Obama Plans to Expand Overtime Eligibility for Millions

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