Overtime Rule is One Thing, Enforcement is Another

iStock_000015098858MediumSan Jose   It’s official now. Starting December 1st, a bit more than six months from now, salaried employees making less than about $47,000 per year or $913 a week will be eligible for overtime pay at time-and-one-half of their effective hourly rate. The last adjustment in 2004 was a bit over $23,000 or $455 per week. Importantly, embedded in the rule is a regular adjustment every three years, so in 2020 the Department of Labor estimates that overtime eligibility will be $51,000. Earlier estimates targeted the impact as potentially effecting more than 5 million workers. Restaurant and other trade associations have indicated continued opposition, but no matter the sound and fury, the impact of this new rule will be huge one way or another.

At the least the new rule mandates a much closer accounting of hours for workers that have been salaried in the range of an effective rate of between $12 per hour and $23 per hour, which will require an obvious adjustment for many employers. The reckoning will not just come in the area of the standard workweek. Any regular meetings, conventions, seminars, and other work-related events that had been automatic for salaried workers in that range will now potentially trigger overtime. And, if not, overtime adjustments in workers’ schedules or exclusion from such events. Travel time has always been a contentious issue for hourly workers, and we can expect a deluge of transitional controversies for such workers now.

Increases before 2004 were more minimal, allowing employers to potentially meet the overtime requirements by raising minimum salaries above the threshold, giving workers a nice raise and avoiding the problems. We can expect that a doubling of the rate will not be met by most employers with an across the board raise of ten or fifteen thousand a year, but some who are close might bump workers over.

Opponents insist that this will mean reduced hours for many salaried workers, and that sounds right, but that’s also fair. Reduced hours for salaried workers does not mean less income than they are receiving now, but at least it means less work for the same amount of money. Workers given fewer hours will either have more leisure or more opportunity to do other work rather than being tied to more hours at the same pay with their primary employer.

My bet though is that this transition will be hard and that the Department of Labor will be swamped with both questions from workers, newly eligible for overtime, and with complaints from many workers whose employers are hoping they can wink-and-nod rather than tightening hours or paying overtime. In city after city where minimum wage increases have been won, we have all found that often the key to whether or not workers actually benefit from the changes is whether or not there is real provision for enforcement. Enforcement means rules with teeth and personnel. There’s no indication that Congress has suddenly beefed up the Wage and Hours Division of the Department of Labor, and they are already lagging in enforcing the existing minimum wage and overtime rules.

For workers to get the benefits claimed by this new rule and actually see increases in real income, it will take a change in employer mindset and enforcement to make sure that employer hearts and minds are forced to change. That change will be harder to realize than the process of simply establishing a new rule. Until then the jury is out on whether or not real wages will increase for salaried workers at the level projected.


Tough Problems on Overtime for Salaried Workers

Time is moneyNew Orleans               The Department of Labor has overshot its goal of writing new regulations on overtime rules for salaried workers by about six months.  Sometimes the issue is foot dragging, but this time it may be simply the fact that it is a very, very difficult issue to handle.

Keep in mind that hourly workers have a right to overtime without exemption.  The issue here is workers who receive a salary, guaranteeing weekly and annual income.  Some of these workers are exempt because of their discretionary, supervisory, or administrative duties amounting to 27% of the salaried workforce.  The other 73% are the issue, though sometimes the classification of the exempt workers are tough issues as well.  Organizers with wildly flexible work hours and job discretion are among the exempt categories.

The levels were set a long time ago in the 1970’s at a $455 per week salary or $23660 per year, so just the tick-tock of time alone makes a case that an adjustment is bound to be called for at some level.  Studies of census data reviewed by the Economic Policy Institute (EPI) find that 12% of salaried workers are below the $455 per week standard now, compared to 65% that were below that number in 1975 when the current rules evolved.

Where the rubber hits the road is the at the level of the increase and the issue of what is known as “compression” in labor economics and collective bargaining, meaning the impact of other wages in relation to each other.  $23660 might not seem like much, but it’s more than 50% above the annual pay at the current minimum wage which would be $15080, if such a minimum wage worker was fortunate enough to get guaranteed hours, which many do not.

Editorially the New York Times is advocating that overtime should be guaranteed to salaried workers who are making less than $1000 per week.    $52000 might seem like chump change in New York City these days in the unforgiving land of the 1%, but let’s keep in mind the fact that 50% of all workers make less than $28031 per year and almost 75% make less than $52000.  Some of these arguments feel like the tactical problem of imagining how we jump the minimum wage from $7.25 per hour to $15.00.   In many places in the country, such a jump is so unfathomable that it makes the whole campaign seem rhetorical, rather than real.  It has also pretzeled even our victories into long timelines stair stepping to the higher numbers.   $50000 feels like that same kind of “pie-in-the-sky” problem, even though it would move over 50% of salaried workers into the overtime bracket.

EPI found that there are also negative consequences of going too high, too fast, not surprisingly in reducing flexibility of work schedules over $40,000.  We found this in a bargaining unit of Licensed Practical Nurses at a nursing home represented by Local 100 in Shreveport, Louisiana.  The nurses make in the range of $17 per hour and the company wanted to ask them to be “on call” for $50 one day on a weekend of every three month period.  Few are ever called so for most this would have been an easy $200 per year, and the union was glad to ask for more.  The workers though were boiling over the issue, because they just plain did not want to lose the flexibility on even those four days of the year.  That was interesting to me!

Maybe we should settle for a fast jump to the $28000 number and a series of bumps to $35000 or $40000 and a sunset provision that forces reevaluation of the standard in a certain number of years.  It is hard to imagine the appetite for a doubling the wage standard of salaried workers in this political climate.  Most salaried workers are way outside of union protection and representation, and the New York Times is not actually their bargaining representative.  We might want to settle for something real so we have something to show for the struggle before Obama hits his expiration date as well.


Colt Ford – Overworked & Underpaid (Feat. Charlie Daniels)