An estimated 20,000 workers in Maine could benefit from a proposed federal rule expanding overtime eligibility.

The new overtime rules unveiled Tuesday by the White House estimated that 5 million workers nationally who aren’t eligible now for overtime will get the time-and-a-half pay under the change. That’s accomplished by raising the limit for the amount a salaried employee can earn and remain eligible to be paid overtime for hours worked beyond 40 a week.

President Obama wrote in an op-ed in The Huffington Post, "In this country, a hard day's work deserves a fair day's pay."

Currently, any full-time salaried employee who has supervisory duties and earns more than $455 a week, or $23,660 a year, is ineligible for overtime. The plan from the U.S. Department of Labor would more than double that limit, meaning that salaried workers who earn up to $970 a week, or $50,440 a year, would be eligible to receive overtime. Eligibility would be determined by annual salary and not include any overtime earnings.

The Obama administration said Tuesday that the earnings limits have been updated only once since the 1970s. They argue that the limit has been eroded by inflation and a worker making $23,660 a year would be earning below the poverty level for a family of four. In 1975, the administration said, 65 percent of full-time salaried employees were eligible for overtime pay and now less than 8 percent are.

“We’ve got to keep making sure hard work is rewarded,” President Obama wrote in an op-ed published Monday in The Huffington Post. “That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay.”

WIDELY VARYING EFFECTS

Labor Secretary Tom Perez said that the change would add $1.2 billion to $1.3 billion in wages for many newly overtime-eligible workers, according to the Associated Press. Others, Perez said, will benefit from employers reducing their hours. At the same time, he said, some employers may choose to hire new full-time or part-time workers to conduct the work salaried employees had once performed.

There are two tests for determining whether full-time salaried workers can earn overtime: the income limit and a so-called “duties” test. The duties test determines whether the workers meet the definition of managers – people who spend more than half their time overseeing other workers, set work schedules and perform other management tasks that make them exempt from overtime pay.

Daniel Rose, a management attorney with the Portland law firm Drummond Woodsum, said the effect of the new rule, which isn’t expected to take effect until next year, will vary widely.

For instance, if a company is paying a full-time employee almost $50,000 a year, it could simply raise the worker’s pay above the $50,440 limit, which would exempt the company from having to pay that employee overtime.

Or the company could hire more hourly employees to limit the need for overtime, change the workers’ duties to make them managers or decide it’s simpler just to pay the overtime, Rose said.

“The fascinating part of this is what it’s going to mean” for individual companies, he said.

‘A COMMON-SENSE UPDATE’

Another Maine lawyer called the new rule “a common-sense updating of the law.” “This is not a windfall, people are working hard and working them 60 or 80 hours and not paying them for it is not something we want to encourage,” said David Webbert, a partner at Johnson Webbert & Young in Augusta who specializes in employment law. “The law has become embarrassingly out-of-touch with reality,”

The Maine AFL-CIO also applauded the rule change, with union President Don Berry saying it “will help millions of working families who are trying to make ends meet” and boost the economy.

But employers’ groups said the rule will make it harder for companies to function profitably.

“The Department of Labor’s moves to revise overtime rules are another of its attempts to set the clock back on modern work practices,” said Iain Murray, vice president of strategy for the Competitive Enterprise Institute, a libertarian, nonprofit think tank based in Washington, D.C.

Julie Rabinowitz, spokeswoman for the Maine Department of Labor, said the new rule, if adopted, would apply to almost all employers in the state. Only a small company operating on a cash basis could likely avoid it.

She also said it’s possible the new rule could be challenged in court, since the previous earnings limit was set by Congress in legislation and now federal officials are attempting to change it through a department rule.

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