Obama doubles overtime pay threshold for 4.2 million American workers

Washington:  The White House on Thursday announced the extension of overtime pay benefits to 4.2 million American workers labelled managers but compelled to work long hours for relatively low wages.

The move addresses a decades-long trend of businesses requiring 50- and 60-hour weeks of a growing body of workers classified as managers and supervisors but paid barely more than those on low hourly wages.

The rule, which comes into force on 1 December, is expected to raise the workforce cost for many businesses already facing pressure to increase their minimum hourly pay as well.

File photo of US President Barack Obama. AFP

File photo of US President Barack Obama. AFP

The action increases the pay threshold below which employees must be paid overtime wages after working 40 hours a week. Held at USD 455 a week for more than a decade, the threshold will double to USD 913 a week, the equivalent of nearly USD 47,500 a year. The level will be adjusted every three years to reflect economic conditions.

"If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones," President Barack Obama said in a statement.

"It's one of the most important steps we're taking to help grow middle-class wages,"  he added.

He cited the case of Elizabeth Paredes, an assistant manager in a Tucson, Arizona, sandwich shop who had worked up to 70 hours a week but never earned any overtime pay because her salary was over the USD 455-a-week threshold. 

"This policy just hasn't kept up with the times," Obama said. 

Only seven per cent of Americans qualify for overtime under the old threshold, the White House said, compared with 60 percent of workers in 1975 who could earn overtime benefits-- usually a 50 percent premium on their hourly wages. 

That erosion has contributed to the stagnation of wages for lower- and middle-class workers nationally, and the shrinking of the middle class, analysts say. 

US business groups were quick to blast the new policy as excessive and harmful to small firms. The rule "represents another regrettable burden being piled on employers as they attempt to grow in a tepid economy," US Chamber of Commerce Senior Vice President Randy Johnson said. 

"There are severe repercussions associated with this for both employers and employees," said Lizzy Simmons, Senior Director for Government Relations at the National Retail Federation. 

The NRF and others argue workers would suffer from being reclassified from managers to hourly workers, and lose flexibility in their daily work.

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Updated Date: May 19, 2016 13:07:23 IST

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