Tens of thousands of Minnesotan workers stand to benefit from changes to federal overtime pay regulations being revealed this week by President Barack Obama.
Writing in the Huffington Post Tuesday, the president outlined a proposal that could mean an estimated 5 million more Americans qualify for overtime pay.
The news has been welcomed by Minnesota's U.S. Sen. Al Franken, who said it could benefit 90,000 workers in Minnesota.
"It's long past time we give fair pay to Americans being undercut by corporations that are taking advantage of outdated overtime rules," he said. "Americans are continuing to work gruelingly long hours without reasonable compensation, and not only are they missing out on economic opportunity, they are missing out on invaluable time with their families."
So what will the changes mean – and who, exactly, would they affect?
What are Minnesota's current overtime rules?
Currently, Minnesota businesses have two different sets of overtime regulations to follow: federal and state.
Under federal, Fair Labor Standards Act (FSLA) rules, many employers are required to pay overtime for all hours worked over 40 in a seven-day period (unless they meet the criteria explained above).*****
This is required for employers who produce or handle goods for interstate commerce, those with gross annual sales of more than $500,000, plus hospitals, nursing homes, schools, and federal, state and local government agencies.
The Minnesota Department for Labor and Industry (DLI) told BringMeTheNews that most businesses in the state are covered by federal overtime laws.
But Minnesota also extends this requirement once a employee hits 48 hours worked in a week, with state rules insisting that all employers must pay overtime from this point, according to the DLI. Overtime pay is also set at 1 1/2 times the employee's regular pay at a minimum.
Some workers are exempt from state rules however, such as taxicab drivers, sales people paid on commission, certain members of the clergy, babysitters, some fire and police workers, some farm workers, and some seasonal workers.
What will the changes mean?
Currently, employers don't have to pay overtime under the Fair Labor Standards Act (FLSA) if an employee satisfies all of the three following criteria, according to this FLSA factsheet by Chamberlain, Kaufman and Jones Attorneys at Law.
These are: If the employee earns more than $23,600; if they are paid on a salary basis; and if they perform job duties that are considered "exempt" (more about that below).
As the Huffington Post explains, these restrictions have meant overtime pay is more commonly paid to those working on an hourly basis, with those on salaries not always being rewarded for extra work they carry out.
Under the changes proposed this week, the President's administration wants to increase the earnings threshold from $23,600 to $50,400.
This means an estimated 5 million more salaried workers with "exempt" jobs paying between $23,600 and $50,400 will suddenly be eligible for overtime pay. As it stands, employers are only obliged under federal laws to pay overtime to those earning less than $23,600. (It was actually lower than that until 10 years ago, when it was increased by the Bush administration.)
Those earning more than $50,400 could still qualify for overtime – provided they have job duties that aren't considered exempt.
What jobs are considered exempt?
Jobs which are exempt from federal overtime pay rules are split into three, which are:
Executive jobs: Where an employee regularly supervises two or more other employees, has management as the primary duty of their position, and has genuine input on decisions affecting other employees (such as hiring, firing, promoting, and so on).
Professional jobs: Workers in "traditional learned" positions that require specialized education are also exempt, including lawyers, doctors, dentists, teachers, architects, the clergy, registered nurses, accountants, engineers and scientists, to name but a few.
Administrative jobs: These are described as office, non-manual workers whose main remit is to "keep the business running." This generally refers to "high-level employees" working in human resources, payroll and finance, records maintenance, accounting, marketing, public relations, and legal departments.
What will the impact be on businesses?
Unsurprisingly, there is some opposition to the proposals, with USA Today reporting business groups and Republicans in Congress are expressing concern that it could lead to a reduction in overtime and potentially a cut in workers.
The National Retail Foundation told the newspaper that most workers "would be unlikely to see an increase in take-home pay," adding that the use of part-time workers could increase, and retailers in rural states could see "a disproportionate impact."
But left-leaning think-tank the Economic Policy Institute called for a change to overtime pay thresholds last year, noting that the number of people getting overtime pay as a result of the FLSA since it was implemented in 1975 has fallen from around two-thirds of American workers to about 11 percent.
The Huffington Post meanwhile explains that those currently working 50 hours a week who don't receive overtime pay as it stands (but would become eligible) could either get a bigger paycheck or see their hours cut down to 40, giving the other 10 hours to someone else.
Alternative, those earning in the upper $40,000s could end up getting a pay rise to the $50,440 so the employer doesn't have to worry about paying overtime and tracking hours, the website notes.