Obama aims to expand overtime pay to more salaried workers

Rules proposed by the Obama administration would make an estimated 4.7 million more salaried workers automatically eligible for overtime pay.
(Saul Loeb, AFP/Getty Images)

Labor advocates have long sought greater protection for a large swath of middle-class workers: salaried employees who are called “managers,” yet often do the same routine work as the low-wage employees they supervise.

“There are plenty of managers who may hold the key to the store, but they’re mopping up spills and taking orders just like everyone else,” said Chris Tilly, director of UCLA’s Institute for Research on Labor and Employment. “They’re spending most of their time doing anything but management.”

Rules proposed by the Obama administration would make an estimated 4.7 million of those workers automatically eligible for overtime pay — an attempt to boost conditions for white-collar employees who have seen their earnings decline as they work longer hours.


The proposal, announced Monday, would dramatically expand the number of salaried workers who are entitled to overtime.

Under current federal regulations, only salaried employees who make no more than $455 a week, or $23,660 a year, are guaranteed to receive overtime after working more than 40 hours a week. The new rules would raise that threshold to $50,440 a year, giving salaried workers much higher up the income scale the ability to work less or earn more for long hours.

“Too many managers are working hard and falling behind,” U.S. Labor Secretary Thomas E. Perez said in a call with reporters Tuesday. “They’re caught in the middle-class squeeze.”

In 1975, more than 60% of full-time U.S. salaried workers were eligible for overtime; now less than 8% are eligible, according to the White House Domestic Policy Council.

The proposed rules will soon be open to public comment for 60 days. Then, the administration will issue final rules.

Labor experts said the new rules complement local initiatives to raise the minimum wage in states and cities across the country, including Los Angeles and San Francisco.


“We’ve seen a big push on raising wages at the bottom,” said Ken Jacobs, chairman of the UC Berkeley Center for Labor Research and Education. “What this does is it addresses these issues not just for workers at the bottom but for workers in the middle.”

Low-wage workers in California have seen their earnings decline more than 10% compared with where they were in 1979, and workers in the middle of the income bracket ($30,000 to 36,000 a year) have seen their pay decline 5% over the same period, according to a report by the center.

The overtime proposal will have less reach in California because the state guarantees overtime pay to salaried workers who make $37,440 a year or less — higher than the current federal standard of $23,660 but less than the proposed threshold of about $50,000 a year.

The state also has a stricter definition of what constitutes a “white-collar employee,” specifying that more than half of the job must be dedicated to executive or administrative duties, not routine tasks.

“The spirit of the law is that you’re someone who’s paid to think, so you have discretion, you have independent judgment in what you do,” said Timothy McCaffrey, a Los Angeles attorney who has worked on hundreds of overtime cases. “If the company or the employer is micromanaging you, and your job is following their direction without independent judgment or discretion, then you should be getting overtime.”

Attorneys in California said that if the federal rule is enacted, it could cause a confusing mismatch in which certain provisions of federal law are stronger than state law, and vice versa.


California’s rules already are tougher in some aspects; for instance, employees start earning overtime after working eight hours in a day rather than after 40 hours in a week.

“I expect California to match or beat the president’s rule,” said Matthew Kaufman, an employment attorney who works in Los Angeles and Ventura counties. “The Legislature in California views itself and prides itself as being more protective of employee rights.”

For more than a decade, some of the nation’s largest chain restaurants and retailers — including Starbucks, Chipotle and Ralphs supermarkets — have been hit with lawsuits alleging that salaried employees worked long hours and were improperly denied overtime because they were classified as managers.

Major business trade groups, including the National Retail Federation and the U.S. Chamber of Commerce, argued that the new federal rules would impose additional costs to businesses and cause employees to lose benefits associated with being a salaried worker.

Neil Trautwein, vice president for healthcare policy at the National Retail Federation, said the group’s research shows that managers don’t want to go back to being classified as hourly employees.

“They don’t want to give up some of the perks that come with being a manager, specifically bonuses and other flexibility,” Trautwein said. “We think it’s not the government’s business to tell us how to structure our management workforce.”


Others criticized the administration for not releasing a clear plan to decide what kind of day-to-day “duties” would exempt a worker from receiving overtime.

Alexander Passantino, a former acting administrator of the Labor Department’s wage and hour division in the George W. Bush administration, said the rules could have the opposite effect: Employers might reduce overtime across the board, meaning workers receive no additional pay.

“It doesn’t mean they get a giant pile of overtime pay,” Passantino said. “The employer isn’t going to work them the exact amount they were working before.”

Perez, the Labor secretary, argued that no matter how employers react to the rules, employees will benefit through more pay, more time off or more employment opportunities for others.

“That puts more money in people’s pockets,” he said.

Twitter: @c_kirkham


Times staff writer Christine Mai-Duc and Michael Memoli contributed to this report.