Rejoice! Obama To Raise Overtime Salary Threshold

Indrani Sengupta
The number of salaried employees eligible for overtime pay will double once Obama's proposal goes into effect, raising many a hard worker out of virtual poverty.

President Obama just put forward a proposal to make up to 5 million more people eligible for overtime. Under this new labor rule, businesses will have to pay eligible employees 1.5 times their regular pay for any work they do beyond the 40 hour usual.

Obama issued the following statement in a Huffington Post op-ed:

"We've got to keep making sure hard work is rewarded. That's how America should do business. In this country, a hard day's work deserves a fair day's pay."

Up until this time, employers had found ways to work around the rules. Salaried employees paid more than $455 a week—which amounts to only $23,660 a year—can be granted the title of “manager,” which affords them with limited supervisory duties while making them ineligible for overtime.

So in effect, managers often end up making less per hour than the workers under them do, despite having more responsibility.

Obama says that this undercuts the existing overtime salary threshold—and the ways in which it can be taken advantage of—defeats the purpose of the overtime law. Overtime rules have not been updated since 2004, and over time, their efficacy has diminished due to inflation. In 1975, 65% of salaried workers were covered by overtime rules. Today, it's just 8%.

When the numbers are laid out thusly, the need for change becomes strikingly apparent.

Under the proposed changes, employees earning up to $50,440 a year will be able to collect overtime pay. In total, this will add between 1.2 and 1.3 billion dollars to the annual wages of newly overtime-eligible workers.

Obviously, the move is, and will continue to, face opposition from businesses and assorted Republicans, who'll argue that the changes will discourage hiring.

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Thankfully, Obama has called for a “rule change”--analogous to an executive order—which means that the move does not have to pass through Congress, where conservatives would have the opportunity to veto it.

Read more: Forever 21 Slashes Employee Hours, Benefits In Fear Of Obamacare

Banner image credit: flickr @ charlesonflickr