New overtime rules a bonus or a curse?

Filibuster Fight
"We anticipate that workers, on an annual basis, will get $1.2 to $1.3 billion in their pockets," U.S. Labor Secretary Thomas Perez said during a press call Tuesday. "Other workers," he said, "will have the gift of time." (AP Photo/Molly Riley)

Millions of American employees will become eligible for overtime pay under new regulations proposed by the U.S. Department of Labor.

"We anticipate that workers, on an annual basis, will get $1.2 to $1.3 billion in their pockets," U.S. Labor Secretary Thomas Perez said during a press call Tuesday. "Other workers," he said, "will have the gift of time."

Perez said the new regulations will particularly apply to salaried low-level managers and supervisors, many of whom, he said, regularly work more than 40 hours - "the manager who was working 20 hours for free under the current rule."

Industry groups pushed back against the proposal, saying that forcing employers to pay more in overtime will require them to cut pay, trim positions and move full-time salaried positions into part-time hourly slots.

"It's a bad deal for retailers and retail employees. It will not help our stores or our employees," said Neil Trautwein, vice president of the National Retail Federation.

He said retailers may respond by moving salaried managers to hourly positions and then cutting their hours, turning them into part-time workers ineligible for health insurance.

"There is a limited pool of compensation, salary and benefits," he said.

The federation estimated that it would cost $9.5 billion annually for retailers and restaurants to implement the change without adjusting payrolls.

Perez said five million workers would be affected as soon as the changes take place - sometime next year, while six million more would gain clarity about their status.

Under proposed regulatory changes, employees who earn below $50,440 a year, or $970 a week, would become eligible for overtime after 40 hours, no matter what their responsibilities or whether they are managers, professionals or administrators.

The threshold now is $23,660 a year; $455 a week.

The new threshold would affect the pay of a general manager of a restaurant-bar in Center City, who did not want to be identified.

"I unlock the door, reset the alarm and put on a pot of coffee," the manager said, describing his day, which begins between 2 and 3 p.m., includes directing the staff, and ends 12 hours later when he tallies the receipts and locks up.

He works five days a week and earns a weekly salary of about $800, no tips or overtime. "I know a lot of people who work more than I do," he said.

The proposed changes, he said, are interesting, but "honestly, I really enjoy working here." He believes he is fairly paid and that he'll get raises and bonuses in the future.

Besides the salary threshold, overtime eligibility is determined by a "duties" test - what duties the employee has and whether managerial duties constitute the primary responsibility, even if the manager also spends a lot of time doing scut work.

Labor economist Lonnie Golden, a professor at Penn State's Abington campus, said the Obama administration has also tried to raise the minimum wage. "They are trying to get the big picture, to apply whatever levers they can, to get income to people whose earnings aren't going up," he said.

"We can keep an economic recovery going if we find that people in that income bracket have more money to spend."

The proposed rules don't address changes in the "duties" but instead ask for more comments.

Uncertainty can prompt employers to stop hiring, said Stefanie Riehl, vice president at the New Jersey Business and Industry Association. "Businesses want to plan. Wages are a huge issue."

For Peter Winebrake, a Dresher employment lawyer who has represented managers filing lawsuits seeking overtime pay, Tuesday's announcement was welcomed news.

"For too long, retail chains, fast food restaurants, and other employers have sought to avoid overtime by simply slapping a 'manager' title and a modest salary on an employee and then requiring her to work the extra overtime hours free," he e-mailed. "This practice is simply wrong."