Millions of American workers who put in extra hours with no extra pay would soon be eligible for overtime under a plan unveiled Monday night by President Obama. The proposed regulations would more than double the current threshold at which many salaried employees stop getting overtime pay, covering those who make up to $50,440 a year.
That is welcome news for workers like Gassan Marzuq. As the manager of a Dunkin’ Donuts in Kingston, Gassan Marzuq sometimes worked 80 or 90 hours a week — spending most of his days serving coffee, running the cash register, and mopping the floors.
Yet because he was a salaried employee who had been deemed ineligible for overtime, his $825 a week in pay sometimes averaged out to roughly the same hourly rate his workers were paid — a reality for many managers when they work more than 40 hours a week.
“I had Dunkin’ Donuts to be my number one family instead of my own family,” he said. “So I really don’t know my kids, and they don’t know me.”
Currently, salaried workers who make more than $23,660 a year, or $455 a week, are exempt if they have managerial authority, professional expertise, or can make important decisions independently. That threshold has not changed since 2004.
The Obama administration’s proposal, revealed in an op-ed by the president on the Huffington Post Monday night and set to be officially announced Tuesday, would extend overtime protections to roughly 5 million workers in 2016.
The proposed salary threshold, which is open to comment before becoming finalized next year, would be automatically updated based on wage growth or inflation.
In 1975, about 62 percent of the salaried workforce were eligible for overtime pay, according to the Economic Policy Institute, a Washington, D.C., think tank that advocates for low-income workers. Today, because of inflation, 8 percent are covered.
Business groups oppose altering overtime regulations, saying that would increase companies’ costs, hurt customer service, and make it harder for workers to move up.
Managers’ hours could be limited so they don’t trigger overtime pay, which means they wouldn’t be able to work extra hours or pitch in as needed, and would have fewer opportunities to distinguish themselves, said Neil Trautwein, a vice president at the National Retail Federation.
“You’ll wind up with a hollowing out of the managerial force,” Trautwein said. “It’s really getting at the heart of how we grow our leadership.”
Paul Ebien-Pesa thought he had taken a big step when he landed a salaried job managing a Family Dollar in Plainville late last year. But Ebien-Pesa, 46, ended up working at least 70 hours a week for his $850 salary, most of it spent helping customers and stocking shelves instead of overseeing employees. During one stretch, he said, he worked 40 days in a row.
He lasted four months, and then quit. “I physically couldn’t handle it anymore,” he said.
Companies are taking advantage of vague regulations to squeeze more work out of people, said Shannon Liss-Riordan, a lawyer representing Ebien-Pesa and Marzuq in separate lawsuits about overtime classifications. Marzuq lost in federal court but is appealing the ruling.
“By sticking a manager or assistant manager title on these workers, these employers get free labor, essentially,” she said.
This also allows companies to hire fewer hourly employees, said Ross Eisenbrey, vice president at the Economic Policy Institute.
“We wonder why we have an unemployment problem,” he said. “This is part of it.”
A Family Dollar spokesman said the company’s store managers are properly classified as exempt from overtime requirements because they are each responsible for the entire store. He noted that federal courts have ruled as such more than 60 times in recent years.
A Dunkin’ Donuts spokesman noted that its restaurants are independently owned by franchisees who make their own business decisions; members of the management team overseeing the Kingston store did not return calls seeking comment. A lawyer for the franchise owner has said in news reports that the company advises managers to hire enough workers to avoid overtime.
As a result of these proposed overtime changes, the National Retail Federation estimates that many of these lower-paid white-collar workers would be made hourly, given a pay cut, or have their hours or benefits reduced as companies try to mitigate their costs.
At White Castle, the Columbus, Ohio, fast-food chain, paying its nearly 400 general managers overtime based on the hours they currently work could increase the company’s costs by between $8 million and $12 million a year, said vice president Jamie Richardson. This could affect how much White Castle is able to invest in health care, holiday bonuses, and profit-sharing, he said, andpotentially restrict managers’ freedom to get involved in the neighborhood.