Overtime Pay Expansion Planned by Administration

March 12, 2014

AA017956President Barack Obama is expected to announce Thursday, March 13 a directive to the Department of Labor to promulgate regulations expanding the number of workers eligible for overtime pay in private companies. The proposal is part of the administration’s and Democrats’ efforts to focus on income inequality in advance of the 2014 midterm elections.

As the current overtime rules stand, workers who are categorized as executive, administrative or professional do not automatically qualify for overtime pay under the so-called “white-collar exemption.” Essentially, this gives employers the latitude to deem as a “salaried employee”—and therefore not subject to overtime pay—any employee whose primary responsibilities are executive in nature. Obama’s proposal would more narrowly define salaried employees thereby opening up potentially millions to overtime pay where they currently are not eligible.

In addition to the overtime exemption rule based on the kind of work done by the employee, there is currently a salary floor ($455 per week) under which any salaried worker must be paid overtime regardless of the type of work done. It is expected that salary floor would be significantly increased, one possible threshold recommended is $984 per week, based on a recommendation from the liberal research group Center for Budget and Policy Priorities, however no exact dollar number has been made available from the White House.

While NSBA is still looking into what this announcement will mean for America’s small-business owners, it’s important to note that small firms haven’t been experiencing windfall profits in recent years that large firms have—quite the opposite, in fact. Such a change–depending on how it is ultimately done–could be very problematic for small firms where the profit margin is often very narrow and could lead to further stalled hiring.