A new definition of overtime pay by the US Labor Department will certainly affect the mobile food industry who already runs on modest margins. The new rules means a food truck manager making $14 an hour – or roughly $30,000 a year – will now be eligible for overtime for any time over 40 hours.
WASHINGTON DC – As the Obama administration cheered “the worker wins” from a newly announced expansion of overtime pay, the directive drew a fierce backlash Wednesday from Republicans and the business community — amid warnings that the move could backfire and hurt workers in the end.
“These rules are a career killer. With the stroke of a pen, the Labor Department is demoting millions of workers,” David French, a senior vice president for the National Retail Federation, said in a statement Wednesday morning.
Policy changes being formally unveiled Wednesday would make more than 4 million U.S. workers newly eligible for overtime pay. They’re intended to counter erosion in overtime protections, which require employers to pay 1 1/2 times a worker’s regular salary for any work past 40 hours a week.
In the fast food and retail industries in particular, many workers have missed out on this because they’re deemed “managers” – they work long hours but are paid little more than the people they supervise.
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.
That means a fast-food manager making $14 an hour – or roughly $30,000 a year – would now be eligible for overtime for those extra hours.
The White House estimates the rule change will raise pay by $1.2 billion a year over the next decade. In addition, some companies may instead choose to reduce their employees’ hours to avoid paying the extra wages.
“Either way, the worker wins,” said Vice President Joe Biden on a conference call with reporters Tuesday afternoon. He’s set to formally announce the rules at an event in Ohio Wednesday afternoon.
But critics warn workers could actually lose out as employers try to avoid the extra costs by converting salaried workers to hourly ones in order to more closely track working time, and cutting back in general.
Business groups say the changes will increase paperwork and scheduling burdens for small companies. The NRF’s David French said hundreds of thousands of workers in the retail sector alone will lose salaried-employee status.
“These regulations are full of false promises. Most of the people impacted by this change will not see any additional pay. Instead, this sudden and extraordinary increase will mean more red tape and fewer advancement opportunities for salaried professionals,” he said.
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