Obama expands overtime pay coverage to 4.2m workers

The White House on Wednesday 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 December 1, is expected to raise the workforce cost for many businesses already facing pressure to increase their minimum hourly pay as well.

The action increases the pay threshold below which employees must be paid overtime wages after working 40 hours a week.

Held at $455 a week for more than a decade, the threshold will double to $913 a week, the equivalent of nearly $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 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 $455-a-week threshold.

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

Only seven percent 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.

But officials and workers' groups rejected those arguments.

"When you pay workers a fair wage, you have a much more productive workforce," Labor Secretary Thomas Perez said.

Richard Trumka, president of the AFL-CIO labor federation, said the rules will "ensure working people get paid for all the hours we work."

"Taking this step to restore overtime is one of the many ways we are beginning to change the rules of our economy that are rigged in favor of Wall Street," he added.

Up to 12.5 million salaried workers could benefit from the new rules because the higher threshold will make it harder for employers to classify them as managerial, the pro-labor Economic Policy Institute said.

"Employer willingness to push the limits of the law have resulted in widespread noncompliance and misclassification."