Roosevelt Institute | Cornell University

Obama's Overtime Overhaul: Much needed reform or the best he can muster?

By Jon LevitanPublished March 23, 2014

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President Obama has used an executive order to expand overtime pay for workers, but some debate remains over whether this move is sincere and effective reform or an acknowledgement that he doesn't have support for true reform.
By Jon Levitan, 3/23/2014

On Thursday, President Obama used his executive power to order a significant revision in overtime pay rules for workers. This order is consistent with his reelection campaign promise to work on the rising economic inequality in the United States.  By bypassing Congress, where Republican opponents would certainly fight the pro-worker order, Obama has made it clear that he is willing to use any power available to him in order to push his agenda. Is this the beginning of Obama's push for a larger-scale reform of American labor law, or is this order an acceptance that he lacks the support for larger reform and can only tweak existing legislation?

The main target of the President's executive order is the "white-collar" exemption in the Fair Labor Standards Act (1938). This clause mandates that "any employee employed in a bona fide executive, administrative or professional capacity" is exempt from receiving time-and-a-half overtime pay. The current definition of this type of worker is one that spends any time supervising others and earns more than $455 a week, which translates to roughly $26,000 a year. This means that roughly 88 percent of salaried workers, according to the White House, are denied the right to overtime pay, even if they spend the majority of their time doing work not typically associated with white-collar jobs. His order does not designate a new threshold, but instead leaves that authority up to Secretary of Labor, Thomas Perez. Mr. Perez is now tasked with a crafting a new plan for expanding the overtime rules so that they better represent the changing American workplace.

There are reasons to believe that Obama is genuinely interested in reforming labor law that has been eroded and lost most of its power over the years. The rhetoric used by the administration in support of the reform suggests that the Fair Labor Standards Act is in need of a facelift. The fact sheet released by the White House specifies that Obama has ordered Perez to "update existing protections in keeping with the intention of the Fair Labor Standards Act." The administration argues that the current way that the FLSA in enforced runs counter to its original purpose. The business practice or denying workers extra pay even if they're forced to work 60 or 70 hours a week is in no way a fair labor standard. This modification to the exiting labor legislation set out in the New Deal, the FLSA and the National Labor Relations Act, marks an important starting point for Obama's push to update antiquated regulation. By attacking such an egregious bastardization of the original law, he is sure to garner as much support as he possibly could for a revision of established legislation.

On the other hand, the fact that this reform is coming as an executive order could speak to the lack of power Obama has to create any new legislation or lasting change. Executive orders cannot create new law; they can only change how established law is enforced. It is possible that Obama wants a large-scale reform of labor law, but this move shows that he realizes he has no chance to do it with the current congress. He may be able to continue to tweak the enforcement FLSA, but he will unable to make any lasting, established reforms the way he did with healthcare. This nature of reform also shifts the debate from macro-issues like the laws itself and puts the focus squarely on the President, if this reforms fails, it will fall on him.

In the end, the truth probably lies somewhere between these two extremes. President Obama clearly is very concerned about the level of inequality in our country, calling it a "crisis." He has, however, faced enormous pressure from the right and from lobbyists who reap massive benefits from rising inequality. This order should serve as a referendum on the effectiveness of the President's attempts to reform labor regulation and promote workers' rights. History may not be on the side of the President, as many larger scale labor reforms, including his own Employee Free Choice Act, have been shot down since the NLRA and FLSA were passed by the Roosevelt administration. Hopefully, however, this order will be a key step in the Obama administration's continuing attempts to reduce exploitation of low wage and salary workers, even if it may appear as a concession of defeat.