Debate Begins: New OT Rules Will Raise Wages — Or Kill Jobs

President Obama has proposed a rule requiring requiring overtime pay for more workers. The plan  has drawn fire from many employers. (AP)
President Obama has proposed a rule requiring requiring overtime pay for more workers. The plan has drawn fire from many employers. (AP)

Business groups and labor unions sharply disagreed today over the potential impact of a proposed change to the federal rule governing overtime pay.

In coming months, the two sides will submit comments in writing to the Labor Department to try to shape the rule's final wording, but the verbal sparring already has begun.

Business leaders say hiking overtime pay would reduce hiring, while unions say the change would stimulate the economy by raising incomes for about 5 million Americans.

Before laying out the different reactions, we'll look at what happened today:

The White House announced its long-awaited proposal to change the exemption that allows employers to not pay overtime wages to executive, administrative and professional employees.

Under current rules, employees who make $455 or more per week and have "white-collar" jobs can be considered managers and professionals, entitled only to a set salary, no matter how much overtime they work.

In contrast, employees who are paid by the hour, or earn salaries of less than $455 a week, generally are entitled to collect overtime pay for hours worked beyond the standard 40-hour week. The $455 threshold was last updated in 2004.

President Obama has said that the failure to push up the pay threshold to match inflation has left millions of workers without fair compensation.

"Right now, too many Americans are working long days for less pay than they deserve," Obama wrote in an op-ed published Monday on the Huffington Post.

So he wants to raise the threshold to $970 a week. That would be "good for workers who want fair pay, and it's good for business owners who are already paying their employees what they deserve—since those who are doing right by their employees are undercut by competitors who aren't," Obama wrote.

A White House fact sheet said that under the "normal rule-making process," the Labor Department will publish the proposed rule in coming days and then accept comments. After reviewing the comments, the department will issue a final rule next year.

Many employees express strong feelings about overtime rules.

NPR reporter Yuki Noguchi spoke to Elizabeth Suffern, who said that when she was the manager of a call center in Boston four years ago, her employer unfairly expected her to deal with work issues almost around the clock. That included early mornings, late nights, Sundays and lunchtime.

"I never realized I was actually federally mandated to be allowed a 30 minute meal period until I actually read the Wage and Hour laws poster that was required to be on the wall," she told NPR.

She has since moved to a better job.

Supporters say the new rule would encourage employers to hire more workers, rather than over-work one person, such as Suffern. Moreover, a boost in overtime pay could stimulate consumer spending, the argument goes.

AFL-CIO President Richard Trumka said the new rule would "provide a much needed boost to our entire economy."

Christine Owens, head of the National Employment Law Project, called it "a crucial step" in a long road to "reversing decades of wage declines that have hammered America's middle class."

But business groups saw it differently. Randy Johnson, a senior vice president with the U.S. Chamber of Commerce, said a rule change "will not guarantee more income, but instead will negatively impact small businesses."

In addition, it would "drastically limit employment opportunities," he said. Many employees would find they will "lose benefits, flexibility, status, and opportunities for advancement," he added.

David French, a senior vice president for the National Retail Federation, said that "turning managers into rank-and-file hourly workers takes away the career opportunities offered by private sector entrepreneurs and job creators that are the true path to middle-class success."

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