WASHINGTON, DC – U.S. Senator Jack Reed (D-RI) today hailed a proposal by President Obama to strengthen overtime protections for millions of middle-class American workers.  The regulations would take effect in 2016, and raise the salary threshold below which workers automatically qualify for time-and-a-half overtime wages from $23,660 to $50,440 a year.

According to the White House, this proposed change in overtime pay eligibly could impact 10,000 workers in Rhode Island.

“This workable plan to effectively bring back overtime pay for middle-class earners is long overdue.  Over the years, overtime pay has eroded, failing millions of workers.  A hard day’s work should earn a fair day’s pay, and updating the overtime threshold means more employees will be treated fairly and have opportunities to advance their careers,” said Senator Reed.  “This sensible plan could help improve the economic standing for 10,000 Rhode Island families, and will ensure the middle-class, and those working to join the middle-class, are not left behind as the U.S. economy continues to recover.”

Earlier this year, Reed and 25 fellow U.S. Senators sent President Obama a letter urging the White House to raise the threshold to expand overtime eligibility for American workers.  “Too many Americans are working longer and harder without anything to show for their efforts in their paychecks,” the senators wrote.  “These long hours are straining middle-class workers and their families.  Since the 1970s, average salaries for middle-class individuals have dropped even while salaried workers have increased the hours they spend on the job.  Strengthening overtime protections will help millions of middle-class families.”

An existing loophole in the Department of Labor’s (DOL) overtime law has allowed businesses to call any employee who is paid more than $455 a week a “manager,” making them ineligible or “exempt” from overtime pay even if they have negligible supervisory responsibilities.  Despite the “manager” title however, a salary of $455 per week would place a family of four close to the federal poverty line.  President Obama’s plan would update the DOL rule for the first time since 2004, and more than double the limit at which employees become ineligible for overtime.  The new threshold would rise to $970 a week, or about $50,400 a year, by 2016.

According to calculations by the Economic Policy Institute: “This higher threshold will guarantee 15 million more workers overtime pay on the basis of their salary alone, in addition to the 3.4 million workers who are already guaranteed overtime pay.  It will boost wages, which have been largely stagnant for the past 35 years, create hundreds of thousands of jobs, and give more family time to millions of working parents.  Overall, 3.1 million mothers and 3.2 million fathers will be guaranteed overtime pay under the new threshold, and 12.1 million children will benefit from their parents’ overtime coverage.”

An analysis by the New York Times found that this change in overtime pay rules would restore the overtime salary threshold to roughly where it stood in 1975 in terms of purchasing power, and significantly help lower and middle-income workers whose wages have generally been stagnant since the recession.  The existing overtime cutoff covered just 8 percent of salaried workers last year, compared with 65 percent in 1975.  Workers in the retail and food service industries are among the most likely to be affected by this change.

-end-