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Obama’s Overtime Extension Plan


President Obama has issued a memorandum directing the Secretary of Labor to propose revisions to the federal regulations regarding who qualifies for overtime protection under the Fair Labor Standards Act. Changes made by the Department of Labor could affect millions of Americans whom, under new regulations, may be eligible for overtime pay.

While we don’t know what these revised regulations will look like, we do know what the Department of Labor will likely address. The Presidential Memorandum instructs the Secretary of Labor to update regulations regarding who qualifies for overtime protection. In so doing, the Secretary shall consider how the regulations could be revised to:

  • Update existing protections in keeping with the intention of the Fair Labor Standards Act.
  • Address the changing nature of the American workplace.
  • Simplify the overtime rules to make them easier for both workers and businesses to understand and apply.

Obama seeks to bridge the gap of income inequality by increasing the income threshold and removing some of the loopholes that prevent certain employees from earning extra income.  According to the fact sheet, released by the White House:

“The overtime rules that establish the 40-hour workweek, a linchpin of the middle class, have eroded over the years.  As a result, millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay. It’s even possible for employers to pay workers less than the minimum wage per hour.”

The Labor Department will begin drafting a proposed rule to revise federal overtime provisions, which then will be open to public comment before the Agency might adopt a final rule; however, there is no current time table at this time.

There is no doubt that the final rule adopted by the Department of Labor, Wage and Hour Division, will likely have a significant influence on how business is done for many companies. It may be beneficial to employers to hire more people in order to minimize potential overtime costs or schedule employees more effectively, to make the most of their time. There is also concern that some companies may be forced to cut pay, instead of hiring, in order to make up the difference. Employers can benefit from proactive efforts to evaluate which employees could potentially qualify for overtime pay under revised FLSA regulations and begin to consider their own strategy for meeting the challenges that may arise.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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