HR Management & Compliance

Obama pushing to make more workers eligible for overtime

The latest development in President Barack Obama’s continuing effort to boost pay for low-wage workers is coming in the form of a plan to increase the number of workers who  are eligible for overtime pay.

A March 11 report on The New York Times website says Obama will direct the U.S. Department of Labor (DOL) to change its regulations so that fewer workers will be ineligible for overtime pay because of their classification as executive or professional employees.

Cecilia Muñoz, director of the White House Domestic Policy Council, is quoted by The Times as saying the reason for the proposed overtime expansion is “to fix the system so folks working hard are getting compensated fairly. That’s why we are jump-starting this effort.”

The proposal has already drawn fire. “If they push through something to make a certain class of workers more expensive, something will happen to adjust,” Daniel Mitchell, a senior fellow with the conservative Cato Institute, was quoted as saying in The Times.

Any changes to the regulations will be subject to the rulemaking process and therefore won’t take effect quickly. Kevin McCormick, chair of the labor and employment section of Baltimore law firm Whiteford, Taylor & Preston and editor of Maryland Employment Law Letter, explained that before any rule change can become final, a number of time-consuming steps must be taken.

Steps include the issuance of a notice of proposed rulemaking and the setting of a comment period. Then, testimony must be taken before the issuance of a final rule that will take effect at a later date. Even then, the issue may not be final because interested parties are likely to file a lawsuit.

“They may try to fast-track it, but it’s a long process,” McCormick said. The process usually takes more than six months.

The news reports coming out ahead of an official announcement from the White House indicate that Obama wants to change both the salary basis test and the duties test under the Fair Labor Standards Act (FLSA). Under current rules, employees exempt from overtime must earn at least $455 a week. The White House hasn’t announced how much higher the weekly pay requirement might be set.

Also, new rules are likely to change the kind of duties a worker must perform to qualify for an exemption from overtime pay. The White House has said that employers are sometimes able to get around overtime obligations by claiming a worker performs “executive” work when most of her duties aren’t really executive work.

The effort to change the FLSA’s regulations differs from the Executive Order Obama issued in January to make the minimum wage for employees of federal contractors $10.10 an hour. The order applies to contracts made after the effective date of the order—January 1, 2015.

Unlike the Executive Order, which affects only federal contractors, McCormick said any change to the FLSA’s regulations must follow the established process and can’t be made “with the stroke of a pen.”

Reggie Gay, an editor of South Carolina Employment Law Letter and a shareholder with the McNair Law Firm in Greenville, said it appears Obama is looking for changes to the white-collar exemptions allowed under the FLSA.

“While it is too early to know the extent of the final changes, it appears that the changes will focus on increasing the minimum weekly salary necessary to qualify for the exemption and the type of work, or percentage of time, devoted to administrative work required to meet the exemption,” Gay said. “Employers will have to pay close attention to the final changes and review each employee’s individual situation to determine whether [he qualifies] as an exempt employee.”

Gay said job descriptions will become even more important and any changes are likely to “add more confusion to an already frequently misunderstood area of employment law.”

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