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Overtime pay may become reality for millions of US workers

Posted at 10:39 PM, May 18, 2016
and last updated 2016-05-18 22:39:04-04

GRAND RAPIDS, Mich. -- More than 4 million U.S. workers will become newly eligible for overtime pay under rules issued by the Obama administration.

The policy changes are intended to counter an erosion in overtime protections, which date from the 1930s and require employers to pay 1 ½ times a worker's regular salary for any work past 40 hours a week.

In the fast food and retail industries in particular, many employees are deemed "managers," work long hours, but are barely paid more than the people they supervise.

Vice President Joe Biden announced the new policy Wednesday during a speech at an ice cream factory.

"When Ronald Reagan was president, for example, the Fortune 500 companies, the CEO made an average 32 times as much as the average employee," Biden said.  "Today, it's 380 times as much.  What happened?"

Under the new rules, first released in draft form last summer, the annual salary threshold at which companies can deny overtime pay will be doubled from $23,660 to nearly $47,500.

Starting Dec. 1, employers will be required to either raise your pay above the $47,500 cap or pay you time-and-a-half for anything you work over 40 hours a week.  That makes an estimated 4.2 million additional workers eligible for overtime pay.

"There is anticipated to be a lot more pay going from business owners to worker's pockets," said Elizabeth Skaggs, a partner with Varnum law firm who advises businesses on how to deal with government regulations issues.  "And yes, there are many businesses that are very concerned about the cost and the interest it will have on their bottom line."

Critics of the new overtime rules say fewer employees will have a path to becoming managers and advancing in their companies, and businesses will be forced to limit people to 40 hours a week and hire part-time employees to pick up the slack.

The Obama administration says the new rules will cost businesses about $12 billion over the next decade.  However, they also say it will save taxpayers from subsidizing corporations who don't pay their employees a living wage.

The Associated Press contributed to this report