Massachusetts employers already under siege from federal health reform, proposed mandated sick time and campaigns to raise the minimum wage now have another front to monitor as the Obama Administration prepares to make millions of additional workers eligible for overtime.
The New York Times and other media outlets are reporting today that the president will direct the Labor Department on Thursday to change the classification rules and wage thresholds that determine overtime eligibility for many employees currently classified as executive or professional. White House officials say the new rules will require overtime pay for millions of currently exempt fast-food managers, loan officers, computer technicians and others whose responsibilities include both supervision and direct work.
The changes have significant implications in Massachusetts, where treble damages are mandated for violations of wage and hour laws.
“The stakes for Massachusetts employers could not be higher,” said John Regan, Executive Vice President of Government Affairs.
“Employers attempting to understand new overtime rules face the threat of punitive treble damages for honest mistakes or good-faith compensation disputes. This is exactly the sort of scenario that should prompt legislators to limit the 2008 treble damages law to willful violations.”
President Obama would expand overtime eligibility administratively under the federal Fair Labor Standards Act. The expansion would be accomplished in two ways, according to media reports:
- The administration would increase the $455 per week threshold below which employers may not deny time-and-a-half overtime to a salaried worker. White House officials did not specify the new threshold level, but the Times notes that the former Chief Economic Policy Advisor to Vice President Joseph Biden co-authored a report last year that recommended raising the amount to $984 per week.
- The administration would also tighten the rules under which employers define which workers are exempt from overtime pay based upon the type of work they perform. The new rules could require that employees perform a minimum percentage of “executive” work before they can be exempted from qualifying for overtime pay. “Under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you’re responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt,” Ross Eisenbrey, a vice president of the Economic Policy Institute, a liberal research organization in Washington, told the Times.
Robert A. Fisher, a partner at the law firm of Foley Hoag in Boston and Chair of the AIM Human Resources and Employment Law Committee, said expanding overtime eligibility will not increase the take-home pay of hard working managers and supervisors.
“Suppose a manager makes $52,000 a year, $1,000 per week, and works an average of 50 hours per week,” Fisher said.
“An employer could just going to transform the individual’s pay into an hourly rate that with overtime mirrors $52,000, about $18 an hour. It does not mean that the manager will take home more pay. Alternatively, an employer could utilize more than one manager to avoid overtime. The company could employ two managers at 25 hours per week, without benefits, at $20 an hour.”
The proposed overtime rule change represents the latest salvo in a broad campaign by the Obama Administration in Washington and the Patrick Administration in Boston to address what officials say is a growing income disparity facing American workers. The White House and congressional Democrats are seeking a federal minimum wage increase from $7.25 to $10.10 per hour while the Massachusetts Senate recently approved a bill increasing the state minimum wage from $8 to $11 per hour over three years.
AIM and employer groups around the country expect to mount aggressive opposition to the overtime rule changes. The president’s proposals will be subject to public comment before they can be approved by the Labor Department, and AIM expects to seek comments from members during the process.
There are other Massachusetts connections to the issue as well. David Weil, a professor at the Boston University School of Management, has been nominated to lead the Labor Department’s Wage and Hour Administration, which would be responsible for implementing the overtime rule changes. Weil is awaiting confirmation for the post, which has been vacant since Obama took office.