Obama directs overhaul of overtime pay rules

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Will expanding overtime rules backfire for businesses?

President orders Labor Department to expand eligibility for workers

President Obama on Thursday directed an overhaul of overtime pay rules, in a move to allow potentially millions more workers to qualify for time-and-a-half pay.

Business groups already are warning the decision could backfire on workers, but Obama pledged to work with both businesses and workers as the new rules are crafted.

"We've got to build an economy that works for everybody, not just for a few," he said. "Today, I'm gonna use my pen to give more Americans the chance to earn overtime pay that they deserve. ... If you have to work more, you should get paid more."

Obama signed a presidential memorandum directing the Labor Department to propose rules that expand the number of employees who benefit from overtime pay. It marked one of Obama's widest-reaching executive actions so far.

The rules would be aimed at salaried workers who make more than $455 a week and those who are ineligible for overtime because they are designated as management even though their supervisory duties are minimal.

The rules do not require congressional action but could take more than a year to implement.

Obama has put a focus this year on increasing worker pay, including a call for Congress to increase the federal minimum wage from $7.25 an hour to $10.10. He also issued an executive order requiring federal contractors to abide by the higher minimum wage.

In his memorandum, Obama directed the Labor Department to recommend new regulations that could increase the salary threshold for overtime eligibility and to change the definition of what constitutes a supervisor.

Obama's attention to overtime dovetails with his emphasis on correcting wage disparities, a theme that he has said will be central to the remainder of his presidential term. It also serves his political ends during a midterm election year, giving him a populist issue along with his calls for a higher minimum wage and better pay for women.

The salary-per-week limit separating those who get overtime and those who don't was increased to $455 in 2004 during the Bush administration. At the time, it hadn't been increased since the mid-1970s.

"What we know right now is the threshold has been eroded by inflation, and there 3.1 million people who, if the threshold had kept up just with inflation, would automatically be covered by overtime provisions," said Betsey Stevenson, a member of Obama's Council of Economic Advisers.

Business groups said any forced increase in wages has consequences that could affect employment, prices and the survival of certain companies which, they said, already have to comply with requirements of a new health care law.

"Similar to minimum wage, these changes in overtime rules will fall most harshly on small- and medium-sized businesses, who are already trying to figure out the impact of Obamacare on them," said Marc Freedman, executive director of Labor Law Policy for the U.S.  Chamber of Commerce.

The Associated Press contributed to this report.