New overtime rule could affect up to 5 million workers

WASHINGTON — A proposed new rule governing overtime pay will mean bigger paychecks for up to 5 million workers, Obama administration officials said Tuesday.

The change "goes to the heart of what it means to be middle class in America," said Labor Secretary Thomas Perez.

Business groups and congressional Republicans said the proposal would force employers to reduce overtime hours and perhaps cut the number of workers.

"Overtime expansion would drive up retailers' payroll costs while limiting opportunities to move up into management," said a statement from the National Retail Federation.

Cory Fritz, a spokesman for House Speaker John Boehner, R-Ohio, said that "instead of working in a bipartisan way to streamline and modernize regulations," the Obama administration is "proposing a new executive order that will limit opportunities and increase costs."

Currently, certain salaried workers who make more than $23,660 cannot claim overtime; the proposed rule would raise that threshold to $50,440 per year for those workers now exempt from overtime benefits.

"Right now, too many Americans are working long days for less pay than they deserve," President Obama wrote in an op-ed for The Huffington Post. "That's partly because we've failed to update overtime regulations for years."

While many workers already qualify for overtime, some salaried workers who make more than $23,660 a year are exempted because they are designated as management or administrative personnel.

Business groups are poised to fight the expansion of overtime rules, saying they will be forced to cut back on workers' hours or workers, period.

The National Retail Foundation said that "most workers would be unlikely to see an increase in take-home pay, the use of part-time workers could increase, and retailers operating in rural states could see a disproportionate impact."

In his op-ed, Obama said most businesses would benefit because "those who are doing right by their employees are undercut by competitors who aren't."

Obama plans to discuss the new overtime proposal in detail during an event Thursday in Wisconsin.

It could take months to finalize the proposed rule, which is now subject to a 60-day public comment period.

The administration can enact the rule through regulation, though the Republican-run Congress can seek to counter it through legislation.

Union supporters of Obama applauded the rule. AFL-CIO President Richard Trumka called it "a critically important step" toward raising wages for all Americans, but only a step because business owners can still deny overtime to employees.

"We will continue fighting until every worker who deserves overtime protections is paid for all their time worked," Trumka said.

Beth Milito, senior legal counsel with the National Federation of Independent Business, said the rule will be especially tough for small businesses in small markets.

"Promoting someone to manager is going to be an expensive proposition for many small businesses and the result will be less mobility and fewer opportunities for workers at the bottom," she said.