New Orleans The Department of Labor has formalized a new rule on overtime that will go into effect on January 1, 2020. Any salaried workers making less than $35,308 annually, will be automatically eligible for overtime. The standard in effect for the last fifteen years, since 2004, set the bright line for mandatory overtime at under $23,660 per year or $455 per week. The new standard is a 50% increase to $679 per week.
There was some disappointment in some quarters that the final rule is less than the Obama DOL proposal that would have paid workers making under $47,000 overtime, roughly doubling the former standard, but the Trump DOL still estimates that this will allow 1.3 million additional workers to be eligible for overtime, which isn’t nothing. Perhaps it is time to take the lemons and make lemonade by looking at the impact this change may drive in wages for lower waged hourly workers?
The existing overtime requirement, calculated for fulltime annual employment at 2080 hours per year, meant that workers making less than the equivalent of $11.38 per hour were eligible automatically for overtime, but not so much if they were over that level, salaried, and could establish discretion in job performance. The Obama proposal equivalent would have paid overtime under $22.60 per hour, more than three times the federal minimum wage of $7.25, and predictably an overreach that brought employers, large and small, out of the woodwork to oppose such a leap. The new standard figured at fulltime hours is equal to $16.98, meaning essentially that a salaried worker would have to be paid roughly the equivalent of more than $17.00 per hour.
Now, $17 an hour is a very interesting number for both living wage campaigners and businesses near that level who want to protect themselves from potential overtime claims. I couldn’t find a DOL estimate of any multiplier effect from this new overtime rule, and given the Republican regime, and its putative claim to still be seen as the party of small-town businesses rather than the Wall Street superrich, they may not have been willing to offer one. Nonetheless, there is a multiplier in reality, whether in fast food, small shops, or even nonprofits, who are unwilling to take a chance, so will raise the pay of lower level and front-line supervisors over the $35,300 and $17/hour standard wanting to be safe rather than sorry against future disgruntled employee claims. Maybe it’s another million workers?
Once this $17 per hour seeps in, it also should finally give a huge boost to the claim of reasonableness for those still fighting for $15 per hour. Sure, it is more, but only a couple of thousand more, so not from another planet, making paying $15, and meaning it, easier for employers to swallow. Furthermore, this overtime rule is national, effecting red and blue states, the South as well as the West, equally. That’s a line that the Fight for $15 has largely not been able to cross in a lot of the country that lacks local option rules or the ability to bring wages forward through initiative and referendum procedures.
This won’t win the fight, but it sure might give it a boost as the new rule sinks into paychecks in 2020.