The Obama administration is making it possible for more American workers to receive overtime pay, the first such hike in a dozen years.
The federal rule change essentially means businesses will have to send some workers home each week after they have hit 40 hours or pay them overtime wages.
“Either way, the worker wins,” Vice President Joseph R. Biden, Jr. , said on a conference call Tuesday.
That’s because, according to Biden, workers will either get more free time to spend with their families or have more cash in their pockets. The White House says the latter would help the economy as workers spend more.
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The new rule increases the overtime threshold from $23,660 in annual wages ($455 per week) to $47,476 annually ($913 a week).
The change reflects a broader push by the Obama administration to give middle-class workers, as Biden put it Tuesday, “a fair shot.”
The Obama administration contends the new rule will raise Americans’ collective wages by $12 billion over the next decade.
Conscious of the business community’s concern about overtime cutting into profits, the White House said in a fact sheet the new regulation was crafted so “employers retain considerable flexibility in how they comply with the new rule.”
That includes giving businesses the ability to hike salaries “to at least the new threshold to keep positions that are primarily executive, administrative, or professional exempt from overtime pay; paying overtime for hours worked in excess of 40 in a week; or reducing overtime hours,” the White House said.
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Biden noted 65 percent of American workers qualified for overtime wages in the 1970s, adding that is down to 7 percent today.
“Americans want to work,” he said, but they should be able to do so with “dignity.”
But one of the country’s biggest pro-business organization says the administration “is being completely divorced from reality.”
“Making more employees eligible for overtime by severely restricting the exemptions will not guarantee more income, but instead will negatively impact small businesses and drastically limit employment opportunities,” Randy Johnson of the U.S. Chamber of Commerce said in a statement while the rule was being considered by the Labor Department.
“Many reclassified employees will lose benefits, flexibility, status, and opportunities for advancement,” he said. “This change is another example of the administration … adding more burdens to employers and expecting them to just absorb the impact.”
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