About 5 million American workers will see a big increase in money or, in some cases, time, as a result of the Obama administration’s new overtime rule, Labor Secretary Thomas Perez said Tuesday.
“We anticipated workers will get another $1.2 billion to $1.3 billion in their pockets as a result of this rule,” Perez said.
Meanwhile, the rule moving certain employees from salaried jobs to hourly positions will mean more time off, from working hours they were not paid for.
“Equally precious is the gift of time,” Perez said during a press call. “It’s not a salary increase, but they will have more time to spend with their families.”
The new overtime rule would extend overtime rules for about 5 million employees across the country, many of whom are now classified as managers who earn salaries. The threshold for overtime will move $50,440 per year, up from the current threshold of $23,660 per year.
The new rule requiring more employees be paid time and a half will primarily affect the fast food and retail industries.
Perez recalled talking to one manager who said a 40-hour week is his version of a vacation, and said people classified as managers are working more hours and earning less because employers have been able to exploit loopholes.
With certain managers working less time, that means more employers will hire workers, Perez said.
“Employers will still have to employ someone for those 20 hours to make up for the employer that was essentially working those hours for free,” Perez said.
However, the rule turns managers into rank-and-file hourly employees, and thus takes away career opportunities, said David French, senior vice president of government relations for the National Retail Federation.
“This proposal isn’t a law but it certainly reflects one – the law of unintended consequences at a time when the economy and those struggling the most can least afford it,” French said in a statement. “Our research shows that the managers who would supposedly benefit opposed this plan and that few workers would actually see more take-home pay. There simply isn’t any magic pot of money that lets employers pay more just because the government says so.
Perez invoked President Franklin D. Roosevelt and the Fair Labor Standards Act numerous times during the call. When asked about objections from business groups, Perez again talked about Roosevelt.
“Anytime we try to make it fairer for the American worker, we always hear the sky is falling,” Perez said. “FDR called them calamity hollers.”
Cecilia Muñoz, director of the White House Domestic Policy Council, asserted that legislation is not necessary.
“The rule is totally within the department’s regulatory authority,” she said.
“The salary exemption was designed for highly compensated white-collar workers,” said Muñoz, who added it has been misapplied to employees making $23,000 or less.
The White House said in a fact sheet that 56 percent of those benefiting from the rule change would be women.
In a Huffington Post op-ed Monday night titled, “A Hard Day’s Work Deserves a Fair Day’s Pay,” Obama said: "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."