Employers React To New Overtime Expansion

President Obama is directing his Labor Secretary to tighten U.S. overtime laws. Under the changes, millions of workers will become eligible. Business groups are now reacting to the news.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

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And I'm Melissa Block. Today, President Obama ordered the Labor Department to strengthen regulations governing overtime pay. The president says too many workers are being denied the money they're owed when they work more than 40 hours a week. But as NPR's Jim Zarroli reports, business groups are already lining up against the White House proposals.

JIM ZARROLI, BYLINE: The president is trying hard to make wage inequality into a signature issue. He's already proposed a big increase in the minimum wage. Today, he told the Labor Department to overhaul the rules governing overtime pay.

PRESIDENT BARACK OBAMA: If you're working hard, you're barely making ends meet, you should be paid overtime, period, because working Americans have struggled through stagnate wages for too long.

ZARROLI: The Labor Department will have its work cut out for it. The law which dates back to the later part of the Depression says most workers should get time and a half when they work more than 40 hours a week. But it's not always clear who's covered and who isn't. The law automatically applies to anyone making less than $455 a week, but that hasn't been updated in a decade and the president says a lot of people who are just squeaking by aren't covered.

Cathy Ruckelshaus is general counsel of the National Employment Law Project.

CATHY RUCKELSHAUS: That averages out on an annual basis to a little bit under $24,000 a year so that's really low, that's close to a poverty level.

ZARROLI: The law also doesn't apply to management and Ruckelshaus says too many jobs are being misclassified as managerial so employers can get out of paying overtime.

RUCKELSHAUS: What's happening is they're using labels like that. They're saying congratulations, you're an assistant manager, now you're overtime exempt.

ZARROLI: Depending on how the regulations are rewritten, a lot of people could qualify for overtime who don't now receive it, says economist Richard Vedder of Ohio University.

RICHARD VEDDER: These will be people who are making $30,000 to $35,000 a year who have some managerial responsibilities. Retail trade, assistant managers in big box stores, restaurants.

ZARROLI: Rewriting the overtime regulations is expected to take months and a lot of different groups will weigh in. Business organizations are already promising to oppose the new rules even before they're written. The U.S. Chamber of Commerce says the new rules will hurt small and medium sized businesses which will end up having to pay their workers more.

Jay Perron, of the International Franchise Association, says the rules will affect the very businesses that can least afford it.

JAY PERRON: Our margins are not what other businesses are. There's not that much flexibility within their margins to take on that much added cost.

ZARROLI: Perron says a lot of businesses will have to choose between using their workers less often and raising prices.

PERRON: They'll have to figure out what those costs are and make sure that those costs don't exceed what they currently are today.

ZARROLI: But polls show Americans are worried about rising wage inequality and in an election year, Democrats are seeking to capitalize on those concerns. And with Congress unlikely to take up the matter, the president has told the Labor Department to address the issue. Jim Zarroli, NPR News.

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