The Final State of the Union
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Summary:
Secretary of Labor Tom Perez explains what the updated overtime rule means for workers in America.
The below was originally posted on the Secretary of Labor's Medium page.
Single mom Elizabeth Paredes is the assistant manager of a sandwich shop in Tucson. She’s paid a flat salary of $24,000 per year. While she routinely puts in 50 or more hours each week, she doesn’t earn a single dime of overtime. That’s because, under outdated rules that govern the overtime eligibility of managers, her employer doesn’t have to pay her for the extra hours she works.
When I was a kid growing up in Buffalo, a job like Elizabeth’s was a well-paying, middle-class job. Being a manager meant being in the middle class. And rightly so. Managers supervise people, open and close the store, handle the money, and make important decisions. They should be able to own a home, raise a family and build a nest egg for retirement.
These were middle-class jobs by design. The blueprint was the Fair Labor Standards Act, which gave most Americans the right to a minimum wage and time-and-a-half pay when they worked more than 40 hours in a week. The Fair Labor Standards Act was the crown jewel of worker protection and helped build the middle class.
But because of both the erosion of the salary threshold over time and concerted policy choices made by the previous administration, that crown jewel has lost its luster. So we’re taking action on behalf of working people like Elizabeth Paredes.
New rule
Today, the Department of Labor announced a significant change to the overtime rule that simply hasn’t been working for working people. In the process, we’re making it simpler for employers to identify which white-collar workers are covered and owed time-and-a-half for work beyond 40 hours in a week.
For decades, th salary threshold under which all white-collar, salaried workers qualify for overtime has failed to keep up with the rising cost of living. In 1975, 62 percent of full-time salaried workers were eligible for overtime protection based on their pay. Today, only 7 percent are eligible under the outdated salary level. The current salary level is so low that it does not effectively identify which white-collar workers are entitled to overtime protection. That is an economy out of balance.
So we’re fixing it. We have more than doubled the salary threshold — lifting it from $23,660 to $47,476 per year. That means some 35 percent of full-time salaried workers, based on their pay, will now be eligible for overtime.
Today we're updating and strengthening #overtime pay rules to make sure millions more Americans are paid fairly. https://t.co/PNxtVNvgqT
— White House Archived (@ObamaWhiteHouse) May 18, 2016
What does this mean?
It means that Elizabeth and other workers like her will finally be entitled to overtime pay. Whether they’re assistant managers at a restaurant or supervisors in the human resources department, white-collar workers who earn below the new salary threshold have their overtime protections restored.
Employers have options for how they respond to the new rule, and they’re likely to do the following:
- Pay time-and-a-half for overtime work.
- Raise workers’ salaries above the new threshold.
- Limit workers’ hours to 40 per week.
- Some combination of the above.
Who benefits?
Today’s rule change, which takes effect on Dec. 1, will benefit 4.2 million workers, making them newly eligible for overtime protections. It clarifies for another 8.9 million salaried workers that they, too, remain entitled to overtime. Now, millions of these middle-class jobs are more likely to be rewarded with middle-class pay, and the millions of Americans who sacrifice family time to work extra will earn extra. If their employer chooses to send them home instead of paying for the extra hours, then it means extra time for family or other professional pursuits.
If you work full-time in America, you should be able to get by; when you work extra, you should be able to get ahead. That’s the commonsense principle we’re reaffirming today. With today’s update to the overtime rule, Elizabeth Paredes and millions like her will be able to punch their ticket to the middle class.
