Business & Economy

Federal overtime rules will make a difference in California — but not much

President Obama wants to change overtime rules so more workers can claim it
President Obama wants to change overtime rules so more workers can claim it

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President Obama's aiming to expand the number of workers who can claim overtime pay - increasing the number of people who can qualify even beyond California's more generous standards.

In the U.S., workers who earn less than $23,600 per year are automatically eligible for overtime. The president wants to more than double that salary threshold to $50,440.

In California, the salary threshold for overtime is $37,440 a year - double the minimum wage.  When the state's minimum wage rises to $10 per hour in January, California's overtime salary threshold will jump to $41,600 a year.  

California also allows eligible employees to claim overtime based on an 8-hour workday, while current federal policy only allows overtime pay based on a 40-hour work week.  

At both the federal and state levels, salary is only one factor in determining who gets to claim overtime. The other most important factor is the nature of a worker's duties.  

But Los Angeles-based labor and employment lawyer Timothy McCaffrey said not everyone understands that part - or wants to.

"They believe that if you pay someone on a salary basis, that’s good enough: in other words: 'you don’t have to pay overtime if you pay them a high enough salary.' That actually is just not true," McCaffrey said.

In fact, an employer can only exempt someone from overtime if that worker has independent judgment and discretion on the job, or routinely supervises two or more employees - even if he or she is paid above the salary minimum to be exempted.

He said he sees a lot of cases where employers "misclassify" a worker, calling them a manager when their duties aren't at all managerial.    

He believes a higher salary threshold could reduce these misclassifications because it'll be cheaper to just pay the overtime than the exempted salary.

"Right now, an employer might feel comfortable paying an employee $41,000 a year, but to have to pay $50,000-plus, they might just draw the line and say that's too much," he said.

The White House proposal to change overtime rules does not need approval from Congress. The federal Labor Department said the rule proposal will be published on Monday and open for public comment until September 4th. 

Business groups are already expressing opposition. 

"This plan isn’t about expanding the middle class," National Retail Federation Vice President David French said in a statement, "it’s about turning salaried professionals into clock-watchers."