One standard way for employers to get around overtime pay (and perhaps even minimum wage requirements) for their employees has been to treat them as salaried employees rather than hourly employees who are subject to minimum wage and overtime pay rules. Recognizing this, the Labor Department had previously set a threshold for salary incomes below which the overtime pay rules would be triggered. However, until now, that threshold has been a pathetic $23,660.00. Now, that threshold will be increased to $47,476. Expect shrieks and screams from Republicans and those who want to bring back the bad old days of the falsely named Gilded Age. A piece in Huffington Post looks at this change that may positively impact millions of Americans. Here are article highlights:
The Labor Department announced Tuesday that it completed one of the most ambitious economic reforms of the Obama era, finalizing a new rule that will extend overtime protections to millions of additional workers.
The administration will accomplish that by raising what’s known as the overtime salary threshold. Nearly all workers earning salaries beneath that threshold are entitled to time-and-a-half pay whenever they work more than 40 hours in a week.
The current threshold is just $23,660. The White House will be doubling that number, to $47,476, guaranteeing overtime rights for salaried workers earning less than that. The Labor Department will now update the threshold every three years to make sure it keeps pace with inflation.
The White House estimates that the change will bring overtime rights to 4.2 million workers who are currently excluded. It will also clarify eligibility for another 8.9 million workers who may or may not have overtime protections under the current rules, officials said.
On a call with reporters Tuesday, Labor Secretary Tom Perez said the reform was meant to address “both underpay and overwork.”
With a minimum wage hike blocked on Capitol Hill, expanding overtime was the most aggressive way for the Obama administration to raise wages for private-sector workers. The White House is making the reforms through the executive rule-making process, under the Fair Labor Standards Act. It doesn’t need congressional approval to do so, although Republicans may still try to block the reforms through the appropriations process.
Passed during the Great Depression, America’s overtime law was meant to protect workers from being worked too long and paid too little. The rules guarantee that workers get paid extra when they work extra. The rules also discourage employers from working employees long hours by making it more expensive to do so, through a time-and-a-half premium.
But under the current regulations, many working-class employees who earn above the low salary threshold are classified as “managers” and therefore don’t have overtime rights. Employers have an incentive to pile work onto these employees, since their extra time essentially comes for free. As a result, in retail some store managers will clock 60, 70 or even 80 hours, but only take home a modest salary in the $30,000 range.
In 1975, 62 percent of salaried workers had overtime rights; now, that share is a mere 7 percent, according to White House estimates. “And you wonder why the middle class is struggling,” Vice President Joe Biden said Tuesday. “If you work overtime you should actually get paid for working overtime.”
“Overworked and underpaid managers, postdoctoral researchers, social workers, insurance claims workers, and many others will have their lives improved one way or another by this rule,” said Eisenbrey, who was one of the most vocal voices for the reform. “It’s great to see the government doing something significant to help the struggling middle class.”
EPI estimates that the effects could be greater than the White House anticipates. The group projects that 12.5 million workers will “directly benefit” from the new rules — slightly more than half of them women, and a disproportionate share of them African-American and Hispanic. The biggest effects will be felt in the South, where a larger share of workers are carved out of protections under the current rules.
Business groups lobbied hard against the new rules, claiming they would lead employers to cut back on hours, and force workers to start tracking their time as hourly employees. What the rules will undoubtedly do is give many employers a hard choice: Either limit workers’ hours to 40 per week so they don’t incur the time-and-a-half premium, or start paying workers more for the extra time they work.
What Republicans and business groups seem to never contemplate is that if workers have increased income, they will spend much of it in the marketplace and boost the economy - and the demand for goods and services. It is not a zero sum game. I can think of many law firms and title companies that may need to revisit their wage practises.