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New Overtime Rules May Fatten Checks of More White-Collar Workers

Jun 25, 2015 / Media Coverage / The Dallas Morning News — Michael A. Lindenberger

Thousands of Dallas-area white-collar workers could see fatter paychecks or shorter workweeks from changes in overtime laws that President Barack Obama plans to announce.

Those changes, promised 14 months ago, have already riled up business groups that warn of higher labor costs and reduced flexibility. Some low-level management jobs, they argue, simply require long hours.

Unsurprisingly, labor unions and workers’ advocates are cheering the rules, which would update the 1938 overtime laws for the first time since 2004.

But just how excited — or worried — they should be nobody knows, since the proposal remains secret. On Tuesday, Labor Secretary Thomas Perez said his agency has finished them but is sharing them with the White House and other agencies before making them public. That could take weeks.

Here’s what is known: Obama plans to raise the ceiling on annual salary for a white-collar worker to qualify for overtime. For eligible workers, overtime is paid at time-and-a-half for hours worked beyond 40 in a week.

Redefining exempt

Currently, employees who meet a handful of other criteria — including whether they are managers or professionals, for instance — can be exempted from overtime laws. But for that to happen, their salaries must be at least $455 a week, or just under $24,000 a year.

Way too many Americans are paid more than that but still deserve to be paid time-and-a-half for long weeks, Obama has said.

“The overtime rules that establish the 40-hour workweek, a linchpin of the middle class, have eroded over the years,” the White House said in March 2014 when Obama promised the new rules. “As a result, millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage.”

House Democrats have urged him to set the new rate at $69,000. An increase that big would make 10 million American salaried workers eligible for overtime.

But most observers say he’s unlikely to aim that high. Senate Democrats have urged him to set the threshold at just under $1,100 a week, or $56,000. Other experts predict a threshold of about $40,000.

If he matches the senators’ expectations, the impacts in North Texas will be felt widely, according to The Dallas Morning News’ analysis of 2013 data from the U.S. Census Bureau.

The data suggest 413,000 full-time workers in Dallas County earned between the current threshold of $24,000 and $56,000. That number excludes government workers and those who are self-employed.

The Census Bureau doesn’t ask whether workers are salaried or paid hourly, so it’s not possible to say with precision how many workers in that range are already eligible for overtime.

But the Current Population Survey results from March suggest that most full-time workers in Texas are salaried, not hourly. Of 7 million full-time workers in Texas who answered whether they were salaried or not, about 5 million were.

By law, overtime rules don’t apply to lawyers, doctors or outside salespersons no matter what their pay is.

Obama is expected to also narrow exemptions in other ways, by requiring, for instance, that a “manager” spend most or all of the work week managing.

Tweaking those definitions will bring unexpected consequences, former Labor Department official Alexander Passantino told The News. Courts are only now settling questions that arose in a wave of lawsuits after the 2004 revision, he said. New changes will probably trigger years of litigation.

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Accounting for hours

Many managers and other white-collar workers spend their days multitasking, he said. They greet customers for an hour, then spend an hour making next week’s schedule — and sometimes are thinking about both at the same time.

Under the new rules, workers who’d rather not have to track their time hour by hour will find that they now must, he said.

That’s why the National Retail Federation says it opposes the changes. And the U.S. Chamber of Commerce has long argued that such changes will hurt job seekers and some current workers.

“Changing the rules for overtime eligibility will, just like increasing the minimum wage, make employees more expensive and will force employers to look for ways to cover these increased costs,” the chamber’s Marc Freedman told Business Insider in March.

Still, Obama has argued that a system that makes just 12 percent of all salaried workers in America eligible for overtime needs fixing.

Using Labor Department numbers, the liberal Economic Policy Institute said that even increasing the threshold to $42,000 would raise that share to 32 percent.

Meanwhile, Congress has been left out of the debate for now. But once Obama issues the executive order establishing the new rules, Republicans may try to curtail them through legislation. Doing so in response to Obama’s executive action on immigration has proven difficult, however.

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