Is it a good idea to expand overtime eligibility?

“President Obama is expected to release this week a long-awaited rule governing overtime that could affect 5 million people as soon as next year, a source familiar with the plans confirmed to NPR,” write NPR’s Scott Horsley and Yuki Noguchi.

The proposed rule would more than double the salary cap under which most workers would qualify for overtime pay whenever they work more than 40 hours a week, the source said. The cap would be raised from $23,660 to $50,440, and indexed to wage growth or inflation, ensuring the cap would move with the overall economy.

The rule is still subject to a lengthy comment period, and is bound to face opposition from the retail and restaurant industries. Unlike the president’s push to increase the minimum wage, though, the overtime rule does not require congressional approval.

  • bob hicks

    Any hourly employee who works overtime deserves to be paid for it, regardless of what their annual wages are.

  • Jim G

    Yes. My step-daughter graduated during the Great Recession with a degree in Graphic Design. She found work. However, she was expected to work beyond 40 hours…closer to 60 each week. Since she was salaried she wasn’t eligible for overtime. These sweat-shops will fight the new regulation, but they have abused their workers far too long.

  • whitedoggie44

    I believe this directive is for any salaried employee who is paid less than $50,440 even if hired as an exempt salaried employee. Time will tell the impact but again it appears that Obama’s directive is engineered to make it as unappealing as possible to be an employer in the US. One reason why we shifted 5000 jobs to eastern Europe in 2014.

    Democrats will never ever learn the leason of unintended consequences. You can’t change the law of economics behind the cost of labor for employers and not expect a reaction.
    The lefts haunting fear that someone, somewhere may be making a “profit.”

    • Khatti

      And how expendable are your employees in pursuit of that profit?

      • whitedoggie44

        Well my first question to you is without profit, we have no company, no employees, nothing as we are BK.
        You can thank our current president and his regulatory czars who have increased our compliance cost by $100M a year.
        No, we do not cheat little old ladies out of their life savings but we have little choice when big government comes knocking to either comply or go out of business.
        We can’t raise our prices due to competitive pressures so have no other options other than lower labor cost which means US employees lose their jobs.
        In summary, its better to save the jobs of majority of employees and the blame all goes back to our current clueless community activist president.

        • Jim G

          Is it really such a bad thing to require employers to pay their employees overtime? Their labor is what is earning the profits. If it means a CEO doesn’t skim more millions in compensation, that’s a good outcome.

          • whitedoggie44

            Time will tell but you are making a mistake by assuming its all the fault of overpaying the CEO. If you took Targets CEO annual compensation and divided it up equally between remaining target employees, they would each receive annual increase of about $65.00. If companies do not feel they can pass this cost onto consumers, they will terminate staff once cost of capital is lower than cost of labor. Its a slippery slope.

          • kevins

            The argument about dividing a CEO’s pay amounts to little more than bologna. When has that ever happened Whitedoggie44? That argument is meant to scare people about possibilities that will not happen, and is purely manipulative. As you said…”If you took..” which is a hypothetical similar to “What if entities form outer space…”. BTW, do you run or work for a company that had a $100 million compliance cost due to the current president? If so, I’m impressed with you. If not, you are a blowhard.

          • whitedoggie44

            clearly, you have no idea and yes it actually exceeds $100M. Go back to your burger flupping job and leave business to those who understand how to add and subtract. Yes, we deal with DOJ, CFPB and OCC on a regular basis and with additional staffing requirements it is very costly.

            I clearly don’t understand your rambling so perhaps this time, study harger for your GED!

          • kevins

            I’ll make it simple for you. So when has a CEO ever been sacrificed and his or her salary divided amongst the employees? Huh?

          • John Dilligaf

            You’re missing the point. Jim G said, “If it means a CEO doesn’t skim more millions in compensation, that’s a good outcome.” whitedoggie44’s reply was very logical and direct that even if the CEO’s salary were cut to zero, it wouldn’t make a significant impact on the remaining employees’ salaries – clearly nowhere near the amount that the additional overtime pay would.

            Nowhere did he say that this would or has happened. It’s simple math showing the effect wouldn’t be what was suggested, not an example of what will happen.

          • kevins

            And you are missing the point. That divide the CEO’s salary bit is used to justify not raising the minimum wage, and in this case, to argue against compensating employees for extra hours worked. It is an emotional appeal rather than a rational one, and it never happens, no matter what the math is. The profit argument is rational, as no employee, CEO or otherwise, benefits from a bankrupt company. Also, claiming that “the left”, whatever that is, has no sensitivity to profit and sustainability in a business sense is stereotyping, untrue, and little more than a scare tactic that is unnecessary.

          • whitedoggie44

            I found it interesting Thomas Perez, the secretary of Labor stated on Tuesday that he had been in contact with many retail companies and they welcme this change. I question, why the always heavy hand of big Gov and not let the market manage this issue. If companies want to pay OT to salaried workers, then they recruit the cream of the crop and others will follow. . Or he is a lying iar.

          • kevins

            I grew up during the Nixon years. As for Perez, I suspect he could be either one, but I tend to always hope for the best, as that is a good business practice..be well!

        • Khatti

          I’ve been listening to business people sing this hymn most of my working life. I’m ready to find out if it’s really true.

  • John Dilligaf

    The hourly rate of those employees just went down to compensate for the time and a half the employer will have to pay – not right away, but over the course of the next few years, expect those jobs’ base rates to either directly decrease or fall further behind the rate of inflation.

  • lindblomeagles

    First, kudos to President Obama! The President said he was tired of “the do nothing Congress;” so tired he would use his Office to get things moving. Raising overtime definitely gets things moving. So let’s talk about what’s good about raising overtime. It will be much more difficult for employers to take advantage of full time salaried workers by paying them a low wage for 40 hours a week while simultaneously not paying them a cent more for the hours worked past 40. Moreover, overtime work will help some families standard of living increase. Now, the bad. Employers may decide to expand the number of part time workers rather than grow full time work. If employers have to pay overtime for employees working 40 hours a week, why not split that one full time position into two half time ones? Moreover, will employers send more jobs overseas to avoid paying Americans a salary and overtime?

  • MarthaP

    Whitedoggie44 has it correct. Anyone with a HS level bare bones knowledge of economics would know that is true. Obama means well based upon his limited skill and far left ideology. He took the job without any_ any prior real life executive experience. Obama has failed to work with Congress for 6 years because he has no leadership skills…at least so says all of our allies.
    Imperial presidency with socialist ideals has shown us it doesn’t work. Bankrupt Greece is learning that lesson today. If one looks at the number of eligible adult workers and the number of filled jobs, we have an under-unemployment rate close to 46% Yea, socialist ideals really pay off, huh?

    • Yanotha Twangai

      Either you haven’t been paying attention, or the ideological lenses through which you view the world has severely distorted your perception of reality, MarthaP. You have it exactly backwards. It’s not that Obama has failed to work with Congress, but that Republicans in Congress have obstructed him at every turn so as to deny him, as far as possible, any success, even if he’s got a good idea, and even if (as with the ACA) it was originally their idea. There’s something mendacious about sabotaging the president’s leadership and then complaining that he’s an ineffective leader.

    • Yanotha Twangai

      Also, please quit lying about the president. It’s simply not true that he has a “far left ideology.” Otherwise, why would the left wing of the Democratic Party keep on complaining that he’s not going far enough? The truth is, he’s a pragmatist. If he really were a radical lefty, he would not have taken “single payer” off the table before negotiations even started on health care reform, nor would he have acceded to the demand by the blue dogs to take the “public option” out. And if he really is a radical leftist, why in the world has he been pushing a free trade agreement that the GOP fully supports and most of his own party, especially the left wing, opposes? Obama is no more a socialist than his predecessor was a fascist. You’re not persuading anybody, MarthaP. Your rhetoric sounds persuasive only to those who already agree with you and whose confirmation bias leads them to seek support for what they already believe. Those who don’t agree with you already only perceive you as an ignorant blowhard. But really, why am I wasting my time replying to you anyway? You’re clearly a hard core ideologue whose mind is made up and doesn’t want to be confused with the facts.

  • PaulJ

    It’d look better if unions (instead of the govt.) forced the change and if our international competitors did the same, but our upper middle class might challenge the upper classes if they themselves get challenged.

  • James

    Thoughts on this from an actual president of a 50-person company.

    We are a manufacturer. We are seasonal. We compete against Chinese imports. We never make “obscene profits” but most years we make a modest profit.

    Currently we have exempt (salaried) and non-exempt (hourly) employees.

    Our non-exempt employees earn between $15 ($31,000) and $25 ($52,000) per hour and all get time and a half when they work overtime. They also get healthcare and a set of other benefits. To some extent, they are underutilized in the off-season (but we do not cut their hours) and very much in demand in the on-season, when they often work as many as 50 hours per week, with 10 of the hours at time and a half.

    Our exempt employees are exempt, not because of their pay rates, but because of their job descriptions. (Typically, they have much more discretion over their day-to-day responsibilities.) Our exempt employees earn between $30,000 a year and greater than $100,000 per year. Exempt employees are “expected to get their jobs done.” Frequently that takes 40 hours a week. Sometimes it take more than 40 hours a week (for instance when there is a big project to complete, a tradeshow to attend, or other spikey demand.) Frequently, if an exempt employee works a big week, they are allowed to take some time off later, in lieu.

    Many companies, including ours, may have an issue with classification. Some of our exempt employees, maybe should be non-exempt. But frequently employees are insulted by the reclassification.

    Being required to pay overtime to non-exempt employees who earn less than $50,000 per year is fine by by me. I find it a little frustrating that we cannot “bank” overtime hours, to give back when times are slack, but such is life.

    Being required to pay overtime to exempt employees who earn less than $50,000 per year will be problematic for the company and for the employees affected. To manage costs, I will think harder about who is given the opportunity to go to trade shows, or stay late to finish an important project. Meaning that younger employees, who are typically being paid less, but are on the path to good pay, will have their development opportunities reduced.

    So candidly, probably not a great idea. Well intended, not doubt, but with fairly extreme unintended consequences.

    My recommendation to Barry O. would be to more tightly manage the the exempt/non-exempt classification, and have the O/T pay rule only apply to non-exempt employees.

  • Kate

    How will this affect teachers? School teachers frequently work 10-12 hour days and make less than $50,000.