Acton Institute Powerblog

Explainer: Obama’s New Overtime Rule

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On May 18, the Obama administration announced the publication of a new Department of Labor rule updating and expanding overtime regulations.

Why did the overtime rule change?

Since the 1930s some white collar jobs (i.e., those performed in an administrative setting) have been exempt from the overtime requirement. The white collar exemption salary level was adjusted in 2004 to $455 per week or $23,660 a year. The new rule will entitle most salaried white collar workers earning less than $913 a week ($47,476 a year) to overtime pay.

The rule also updates the total annual compensation level above which most white collar workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year

The salary threshold will also automatically be updated every three years, beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020.

How is overtime pay determined?

Unless covered by another exemption, employees covered by the FLSA must receive overtime pay for all hours worked over 40 in a workweek at a rate not less than one and one-half times their regular rate of pay.

What gives President Obama the authority to regulate overtime pay?

The Fair Labor Standards Act of 1938. This federal statute introduced the forty-hour work week, established a national minimum wage, and guaranteed “time-and-a-half” for overtime in certain jobs. When he signed the original bill into law, President Franklin D. Roosevelt said that, next to the Social Security Act, it was the most important act passed during the New Deal era.

In March 2014, President Obama directed the Secretary of Labor to update the overtime regulations to “reflect once again the intent of the Fair Labor Standards Act, and to simplify and modernize the rules so they’re easier for workers and businesses to understand and apply.”

How many people will be affected?

The federal government estimates that over 4 million workers will be affected within the first year of implementation.

When does the new rule go into effect?

December 1, 2016.

What are some of the negative effects of this policy?

For an explanation of five ways this rule will hurt workers, see here.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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