AP Photo/Pablo Martinez Monsivais
Editor's note: In 2013, Economic Policy Institute vice-president Ross Eisenbrey co-authored with economist Jared Bernstein a paper that first proposed expanding the eligibility of workers for overtime pay. Yesterday's Labor Department ruling closely follows their proposal.
The overtime rules the Department of Labor announced yesterday are hugely important. They would restore in one action most of the overtime protections that have been lost over the past four decades through neglect and hostile regulatory changes, and prevent them from ever eroding again. Altogether, 15 million salaried workers would gain the right to time-and-a-half overtime pay or have their existing rights strengthened.
Since the New Deal, the law has protected workers from being forced to work overtime without getting paid for it. The Fair Labor Standards Act of 1938 set 40 hours as the standard workweek and made employers pay 150 percent of the regular pay rate for longer hours. That's why most Americans enjoy a two-day weekend today.
The problem we face now is that millions of people the law was designed to protect are no longer being protected.
Millions of Americans, especially salaried employees, are working overtime and not getting paid for it.
Hourly workers in most service and blue-collar jobs are guaranteed the right to overtime pay. For salaried workers, the story is more complicated. Whether they are eligible for overtime pay is determined by both their salary level and the nature of their work.
Federal overtime rules are meant to exclude from overtime protections workers who, because of their pay and responsibilities, have enough power and authority within their workplace that they don't need these protections. These include professional and managerial workers who do relatively high-level work, have a high degree of control over how they spend their time, have a department and employees to supervise, and-here's the critical part-who earn a salary that actually reflects this status and importance.
The Labor Department's overtime regulations set a salary threshold for eligibility. Any salaried worker earning below this threshold is guaranteed the right to earn overtime pay. That means that no matter what your boss calls you-store manager, shift supervisor, assistant to the regional manager-if your salary is below the threshold, you are eligible to earn overtime. This is a simple and important protection.
But here's the problem: The salary threshold has never been pegged to inflation. The threshold today is only $23,660 a year. In 1975, that covered about 61 percent of all salaried workers; today it protects just 8 percent. It has been adjusted only once since the Ford Administration, so minimally that the current level is less than the poverty line for a family of four.
Here's what that means in practice. Let's take Liz. She works at a restaurant and makes $28,000-a-year. She spends most of her time serving customers, cleaning floors, and running the cash register, but because she helps schedule her coworkers' shifts and occasionally manages inventory, her boss gave her a job title of assistant manager. Most weeks she ends up working close to 60 hours, but because her employer calls her a manager, and because her salary of $28,000 is over the current threshold, she gets paid for just 40 of her 60 hours. Her boss has an incentive to say she's a manager, because it means he can make her work extra hours without having to pay for it.
The Department of Labor's proposed rule should put an end to this kind of charade. By setting a salary threshold that's actually appropriate for managerial employees-$50,440-the rule makes Liz unequivocally eligible for overtime pay.
This rule will have three important effects: It will mandate pay raises for many workers like Liz and lead some employers to reduce their faux managers' hours and shift work to part-time employees who need the extra work. It will also make employers less cavalier about their employees' work hours. When an employer thinks he owns the employee's time and doesn't have to pay for it, he'll use a lot more of it. Even more important than the billions of dollars in wage increases this rule might generate, it will preserve a fundamental labor standard that workers fought and died for 100 years: eight hours of work, eight hours of rest, and eight hours for what you will.
