Millions of Salaried Workers Could Get Overtime Pay Under Proposed Rules

In his State of the Union address last year, President Barack Obama led the charge for raising the minimum wage. He announced that he was raising the minimum wage for federal workers and contractors, via executive order, to $10.10 per hour for new hires. Many state and city governments have also taken steps to increase the minimum wage far above the current federal rate of $7.25 per hour. Four months later Congress had its opportunity to join the crusade with its own vote to raise the federal minimum, but it failed to get a vote on the floor.

In March 2014, President Obama signed a memorandum allowing the Department of Labor to revisit the current wage and hour laws and update the Fair Labor Standard Act’s (FLSA) overtime rules. Established in 1938, the FSLA mandates that all workers should receive overtime pay for hours worked over 40 hours in during a one week period. There are several exemptions, particularly those for salaried, administrative and supervisory workers. As a result, many employers will pay employees a salary, give them a title of supervisor or manager and, therefore, not have to pay them overtime. In an attempt to discourage this practice, the overtime threshold was updated in 2004 to $23,660 per year. This meant that anyone – even salaried workers – who made this up to the threshold were to receive overtime for hours worked over 40 hours per week.

The overtime threshold was designed to be indexed to inflation. However, it has only been raised eight times in 75 years and 2004 was the only time since 1975. This means that many salaried workers are often making less than minimum wage. At a ceremony signing the memorandum, President Obama said, “It’s not right when business owners who treat their employees fairly can be undercut by competitors who aren’t treating their employees right. If you’re working hard, you’re barely making ends meet, you should be paid overtime. Period.”

This month, the DOL will announce the results of their year long process. If the overtime threshold had been indexed to inflation each year, the current amount would be $50,400. It is expected that the DOL is considering raising the threshold to as high as $52,000. According to the Economic Policy Institute, this could mean between five and ten million salaried workers would essentially receive a raise. The proposed threshold would be in line with the national median household income.

The Economic Policy Institute believes that the “white collar worker” exemption is no longer valid in today’s workplace. They note that many executives, administrators, and professional employees have routine tasks and often low pay, all while not having autonomy over their schedule or tasks as would be typical of true professional level employee. The proposed updates could also eliminate this exemption.

Needless to say, business groups and Republicans claim that this will lead to layoffs and cuts in schedule. While there would indeed be more labor costs, it could also mean increased employment. Companies would have to decide to pay the extra overtime, or hire another employee to cover the extra work. The “sky is falling” rhetoric rings a bit hollow considering that if there is still work to be done, they will have to have someone to do the work. Now, they just have to pay them a full wage for doing so.

Once the proposal is published, there will time for public comment. It is anticipated that the comment period, review, and issuing of final rules could be done before President Obama leaves office. Adoption of the rules will not require congressional approval.

Photo credit: Thinkstock

39 comments

Jim Ven
Jim V2 years ago

thanks for the article.

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Jim Ven
Jim V2 years ago

thanks for the article.

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Jim Ven
Jim V2 years ago

thanks for the article.

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Jim Ven
Jim V2 years ago

thanks for the article.

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Jim Ven
Jim V2 years ago

thanks for the article.

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Siyus Copetallus
Siyus Copetallus2 years ago

Thank you for sharing.

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Mary B.
Mary B2 years ago

It's about time ! The right wing people are doing nothing but repeating the same worn out arguments and do not warrent any more space. Life simply does not work the way they claim it does, nor do their economic policies. Most of their ideas are just more junk in the way of progress that needs to happen if the people of this country are to reclaim any real freedom and sense of empowerment.

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Ed G.
Ed G2 years ago

Thirty or so years ago I was working 100 hour work week all I got was a salary no OT however I did a fair amount of time off, would I do it again hell no 100 hour work week is great if you don't have a life.

ps: I also got laid off and they had to hire 4 people to do the work that I did,

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Paulinha Russell
Paulinha Russell3 years ago

Thank you

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Danuta Watola
Danuta W3 years ago

Thanks for sharing

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