By Benjamin Goad - 03/12/14 09:28 PM EDT
Business groups and congressional Republicans are blasting regulations President Obama will announce Thursday that could extend overtime pay to as many as 10 million workers who are now ineligible for it.
While liberals lauded the plan as putting more cash in the pockets of millions of workers, business groups warned it would damage the economy and Republicans said it was another example of executive overreach.
“This came as a shot out of the blue,” said David French, the National Retail Federation’s senior vice president for government relations. “Just on the surface, this looks like an enormous new administrative burden.”
Few details were released Wednesday about the initiative, which the administration is expected to detail on Thursday.
“What we’re trying to take a look at is how we can make the labor force as fair as possible for all workers and that people get rewarded for a hard day’s work with a fair wage,” Betsey Stevenson, a member of the White House Council of Economic Advisers, told reporters Wednesday.
Current regulations require employers to pay overtime to salaried workers making less than $455 a week. Obama’s proposal would redefine which employees can be classified as “executive or professional” and thus ineligible for overtime pay.
The action would expand the sphere of eligible employees to include, for instance, fast food shift supervisors and some office workers now being denied overtime pay. It was unclear how high the weekly pay threshold might be raised.
Employees would also be required to perform a minimum percentage of “executive work” to qualify for the so-called white-collar exemption, narrowing a loophole that allowed companies to exempt certain workers.
Labor Secretary Thomas Perez pledged that his agency would conduct a “complete” and “thorough” rulemaking process before final regulations are issued.
He would not say if that could happen this year.
“I’m all about getting it right,” Perez told The Hill. “We’re going to take whatever time is necessary.”
Depending on the final product, new regulations could benefit as many as 10 million new workers, according to the left-leaning Economic Policy Institute.
But the plan could backfire if employers choose to limit the hours of employees or cut their base pay to account for expected overtime.
“That’s just a mathematical formula,” said Tammy McCutchen, who served as administrator of the Labor Department’s Wage and Hour Division during the George W. Bush administration.
McCutchen presided over the last update to overtime regulations, which took well over a year to complete a decade ago, and were the subject of an intense fight in Congress.
The job of ushering through the regulations this time around could fall to Boston University professor David Weil, Obama’s nominee to head the Wage and Hour Division.
It will be no easy feat.
Time is already beginning to run out on Obama’s regulatory agenda, since complex rules routinely take a year or more to develop and put into place.
“Nobody saw this coming,” McCutchen said. “This proposal has never been disclosed.”
The Labor Department’s official rule-making agenda contains no mention of the initiative.
Business groups said changing overtime pay could damage the nation’s fragile economic recovery.
“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,” said Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce.
Stevenson, however, contended that there would likely be an increase in employment as a result of the change, with companies deciding to hire more employees rather than paying existing workers at a higher rate.
Proponents say the regulations are an issue of fairness.
“I think that if you put in a full week’s work and you end up being asked by your employer to work longer hours, you deserve to be paid a little extra,” said Rep. Xavier Becerra (D-Calif.).
But Republicans in both chambers of Congress derided the move as executive overstep.
“It’s just a continuation of the president acting in an authoritarian, unconstitutional way and doing everything he can get away with, because [Senate Majority Leader Harry] Reid isn’t going to entertain any legislation to override him,” said Sen. Chuck Grassley (R-Iowa).
Grassley said he doesn’t believe Obama has authority to overhaul the overtime system and said he expected the regulations to wind up in court.
Others, including Rep. David Schweikert (R-Ariz.), questioned whether the move was motivated by election-year politics.
“You wonder how much of this is going on to try to find some enthusiasm … this cycle,” Schweikert said.
White House press secretary Jay Carney bristled when asked whether the overtime effort — coupled with a White House meeting focused on women’s economic issues, and other presidential pushes on unemployment insurance and the minimum wage — were designed to rally support ahead of the midterm elections.
“You know what, I think every woman in here ought to be offended by that. I’m offended by it on behalf of my wife and my daughter. It’s crazy,” Carney said.
“Altering and modernizing the rules regarding overtime is the right thing to do for the whole economy,” he said.
Justin Sink contributed.