President Obama is about to give Ronald McDonald a little extra in his pocket. According to the New York Times the president is about to use his pen to direct the labor department to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as “executive or professional” employees to avoid paying them overtime.
Conservatives criticized Mr. Obama’s impending action. “There’s no such thing as a free lunch,” said Daniel Mitchell, a senior fellow with the Cato Institute, who warned that employers might cut pay or use fewer workers. “If they push through something to make a certain class of workers more expensive, something will happen to adjust.”
Mr. Obama’s authority to act comes from his ability as president to revise the rules that carry out the Fair Labor Standards Act, which Congress originally passed in 1938. Mr. Bush and previous presidents used similar tactics at times to work around opponents in Congress.
The proposed new regulations would increase the number of people who qualify for overtime and continue Mr. Obama’s fight against what he says is a crisis of economic inequality in the country. Changes to the regulations will be subject to public comment before final approval by the Labor Department, and it is possible that strong opposition could cause Mr. Obama to scale back his proposal.
Cecilia Muñoz, the director of the White House Domestic Policy Council, said the effort was part of Mr. Obama’s pledge to help workers thrive. “We need to fix the system so folks working hard are getting compensated fairly,” she said on Tuesday evening. “That’s why we are jump-starting this effort.”
The overtime action by Mr. Obama is part of a broader election-year effort to make people forget Obmacare by portraying the Democrats as friends of the poor an middle-class.
Under current federal regulations, workers who are deemed executive, administrative or professional employees can be denied overtime pay under a so-called white-collar exemption.
Under the new rules that Mr. Obama is seeking, fewer salaried employees could be blocked from receiving overtime, a move that would potentially shift billions of dollars’ worth of corporate income into the pockets of workers. Currently, employers are prohibited from denying time-and-a-half overtime pay to any salaried worker who makes less than $455 per week. Mr. Obama’s directive would significantly increase that salary level.
In addition, Mr. Obama will try to change rules that allow employers to define which workers are exempt from receiving overtime based on the kind of work they perform. Under current rules, if an employer declares that an employee’s primary responsibility is executive, such as overseeing a cleanup crew, then that worker can be exempted from overtime.
Recently the CBO estimated that a Democratic Party proposal to increase the minimum wage to $10.10 from $7.25 would reduce employment by 500,000 workers by 2016. It will be interesting to see the effect of this latest move by the President.