Share this article

print logo

OT plan raises doubts on trade-offs

Teresa Klemann, of Amherst, is one of the 4.68 million salaried workers who would earn more money under President Obama’s proposal to change the threshold that makes workers eligible for overtime pay.

At first blush, she liked the idea of getting paid for the time she put in beyond 40 hours each week. But then she started wondering how her employer, an aftermarket auto parts distributor with stores across the country, might respond to the change.

Would the new system affect other perks of her job? Would she lose other benefits, such as paid personal days, as the company tried to make up for the extra money spent on payroll?

Sure, she wasn’t compensated when she stayed late, but she could also attend events at her children’s schools or take them to doctor’s appointments without penalty.

“In the long and short of it, I may not see the actual money in my pocket for working the extra hours, but I see it in the extra time I’ve been able to spend with my children,” she said.

Retailers and manufacturers have blasted the plan, saying the move would stunt workers’ careers and cost companies billions.

The National Retail Federation says Obama’s proposed rule change to greatly increase how many salaried employees can claim overtime would force companies to use more part-time and entry-level workers. Businesses also may offer fewer promotions and convert salaried employees to hourly to avoid raising their pay, the retail federation said.

“The proposal is going to cost billions of dollars,” said Neil Trautwein, vice president of the federation, the industry’s largest trade group. “It’s going to limit advancement opportunities, and ultimately it will reduce employee benefits.”

The federation said the move, which would go into effect next year, would cost $9.5 billion annually if retailers and restaurants implemented the change without making adjustments. Total payroll expenses for all 25 million workers in these industries were $545 billion in 2012.

Obama’s plan would make workers who earn a salary of as much as $970 a week, or about $50,000 a year, eligible to claim overtime under the Fair Labor Standards Act. The current threshold is $455 a week, or about $24,000 a year, which is below the poverty line for a family of four. This change would benefit 4.68 million people, the White House said Tuesday on its website.

An analysis by the Economic Policy Institute showed large increases in the percentage of workers that would be eligible for overtime pay if the threshold were raised to a level similar to Obama’s proposal. Among retail supervisors, about 56 percent would be covered, up from 8 percent.

The group calculated comparable jumps for restaurant managers, insurance clerks and customer service representatives.

Major chains already were under pressure to boost hourly wages for their lowest-paid workers. Many, including McDonald’s and Walmart, have done just that. Now, Obama says he wants to boost the pay of middle management. Of those affected, a majority have college degrees, are women and are older than 35, the Department of Labor said.

“A hard day’s work deserves a fair day’s pay,” Obama said on the White House website. “That’s at the heart of what it means to be middle class in America.”

The retail federation and other trade groups aren’t buying it.

“The Department of Labor announced the demotion of at least 5 million Americans,” Joe Trauger, a spokesman for the National Association of Manufacturers, said in a statement. “This proposed regulation is another in a long list of regulatory roadblocks to healthy and robust economic growth and job creation.”

Bloomberg News contributed to this report. email: