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In 2016, after two years of preparation, listening sessions, economic analysis, and bureaucratic hoop-jumping, Secretary of Labor Tom Perez announced an update to the rules governing which workers are guaranteed overtime pay when they work more than 40 hours in a week.
The Fair Labor Standards Act requires that nearly every employee be paid time-and-a-half for working more than 40 hours a week—but certain salaried workers can be exempted if they qualify as an “executive, administrator, or professional.” Because who qualifies as an executive can be tricky to determine, the law also sets a bright-line salary threshold, so that low-paid workers can't be stuck working long hours without overtime simply because they have some managerial duties. When the threshold was updated in 1975, more than 60 percent of full-time salaried workers were under the threshold and thus automatically qualified for overtime. But the threshold has never been adequately updated since that time, and by 2016, the share of full-time salary workers covered had dropped to less than 7 percent. Over the course of 40 years, a once-standard provision that protected middle class workers from having to put in long hours for no extra pay had all but disappeared.
The 2016 rule would have increased the threshold from $23,660 to $47,476 and indexed it to wage growth going forward. This change was by no means overly expansive; the only reason it was a big increase is because it had not been appropriately updated in the preceding 41 years. Only 33 percent of salaried workers would have been covered under the 2016 rule—far fewer than had been covered historically. If the threshold had simply been adjusted for inflation since 1975, today it would be over $55,000.
Business trade associations and Republican-led states challenged the rule in court, and at the end of 2016, a Texas district court judge overturned it in a ruling that even conservatives agreed went too far. But the Trump administration declined to defend the 2016 threshold, and today the overtime threshold continues to languish at just under $24,000 a year.
Now, the Trump administration is close to publishing a new proposal that would dramatically weaken it. Bloomberg is reporting that, despite the steps taken to finalize the 2016 rule and the fact that the threshold is well within historical norms, the Trump administration is about to publish a rule with a dramatically lower cutoff, at around $35,000 a year for a full-year worker.
A preliminary calculation suggests well over half of the workers who would have gotten new or strengthened overtime protections under the 2016 rule would be left behind by Trump administration rule.
The 2016 rule was the result of an exhaustive process spanning more than two years. During this period, the Department of Labor met with more than 200 organizations on all sides of the issue and reviewed and incorporated input from more than a quarter-million public comments. After this rigorous, evenhanded process, the department arrived at an economically sound rule that represented an appropriate update to our labor laws.
I know, because I was the Labor Department's chief economist at the time.
In order to justify a new rule, DOL will have to explain why the previous, painstaking rulemaking effort was inadequate. If it's unable to do so, its new rule will not hold up to a legal challenge. Luckily there is an easy way around this—the Trump administration should defend and implement the 2016 rule, and give millions of middle-class workers a badly needed raise.
