Perez said the Labor Department's current test is a "loophole" in
U.S. wage-and-hour law that lets employers treat many workers as
overtime-ineligible managers even if a lot of their work is the same
as non-managers, who do get overtime.
"I think that's wrong. The president thinks that's wrong," Perez
said in a speech on Monday at an International Association of Fire
Fighters legislative conference in Washington.
President Barack Obama last week directed the Labor Department to
weigh revamping overtime rules related to the country's
wage-and-hour law, the Fair Labor Standards Act.
Under the FLSA, non-management workers are entitled to extra pay for
hours worked beyond 40 hours a week at one-and-a-half times their
regular hourly wage.
That is not the case for many, though not all, so-called
"white-collar" workers, or "executive, administrative and
professional" employees who receive a salary.
Overtime pay can be claimed by salaried employees who make below a
set salary threshold, which has been at $455 per week since 2004.
Obama, a Democrat, said he wants to raise that threshold, making
more people eligible for overtime pay.
"That threshold has failed to keep up with inflation, only being
updated twice in the last 40 years and leaving millions of low-paid,
salaried workers without these basic protections," according to a
White House overtime fact sheet.
Only 12 percent of salaried workers today fall below the current
threshold, compared with 18 percent in 2004 and 65 percent in 1975,
the fact sheet noted.
Obama's overtime proposal is one of several worker-friendly
initiatives that he is pushing ahead of November's mid-term
elections, with his effort to raise the federal minimum hourly wage
blocked by Republicans in the U.S. House of Representatives.
TWO KEY CHANGES
Perez's speech at the IAFF conference made clear that Obama's
"update" to the overtime rules will include re-examining the Labor
Department test used to assess whether workers are managerial or
"As a result of a loophole that was written into the regulation in
2004 by the Bush administration, quite literally somebody can work 1
percent of their time on management issues, 99 percent stacking the
shelves and doing other work that has nothing to do with management,
and you're considered a manager, and you are no longer entitled to
overtime," Perez said.
[to top of second column]
He was referring to a lawsuit brought by a former store manager for
Family Dollar that alleged she and other managers had been
improperly classified as executives when they spent the "vast
majority" of their time on "non-executive tasks," according to court
The store manager who brought the case worked 50 to 65 hours a week
and earned a weekly salary of $400 to $655 during her years with the
discount chain. She testified that about 99 percent of her week was
spent stocking merchandise, manning the cash register and doing
A district court dismissed the case. The ruling was affirmed by the
4th U.S. Court of Appeals, which hears appeals from federal courts
in South Carolina, where the store was located.
"While she catalogs the non-managerial jobs that she had to do,
claiming that they occupied most of her time, she does so without
recognizing that during 100 percent of the time, even while doing
those jobs, she was also the person responsible for running the
store," the 4th Circuit wrote.
When the Labor Department last updated overtime regulations in 2004
under Republican President George W. Bush, the salary threshold was
raised to $455 from $250.
But the agency also revised the "primary duty" test that determines
whether workers are managerial, refocusing it toward multiple
subjective factors and away from time spent on a particular duty.
This change opened the door to the idea of concurrent duties,
experts told Reuters.
"When the Fair Labor Standards Act was passed, one of the principal
notions of it was, if you work more than a 40-hour week, you should
be paid time-and-a-half," Perez said. "And that has been an article
of faith, but that regulation in 2004 has eroded that article of
(Editing by Kevin Drawbaugh and Chizu Nomiyama)
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