President Obama Raises the Overtime Salary Threshold

Harv

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Here is a link to an article.

Here is the article:

Spoiler :

By significantly increasing the salary threshold below which salaried workers get overtime pay, President Obama just took a big step toward updating a critical labor standard with the potential to boost the paychecks of millions of middle-wage workers, many of whom should be getting overtime but are not.

And because this is a “rule change”—analogous to an executive order—it doesn’t have to go through this Congress, where conservatives would surely try to kill it. In other words, the president meant it when a few months back he said that if Congress wasn’t willing to work with him to help reconnect the economic fortunes of the middle class to the growing economy, he’d find ways to do it himself.

In this case, the reconnection involves the updating of labor standards introduced in the Fair Labor Standards Act (FLSA) of 1938, legislation that included a national minimum wage and time-and-a-half pay for hourly and certain salaried workers after 40 hours of weekly work.

Why cover any salaried workers? Because the law needed to preempt the possibility that some employers might just label someone a salaried worker to avoid having to pay time-and-a-half. So a salary threshold was introduced, below which workers were automatically non-exempt. The problem is the threshold wasn’t regularly adjusted for inflation, and while it has been sporadically raised, it has fallen well behind its historical levels, once you adjust for inflation (the new rule also proposes to index the new threshold to either price or wage growth; which one will be decided during the forthcoming comment period, where outside stakeholders can weigh in on the proposed rule).

The current threshold is only about $23,700. The president’s proposal takes it up to $50,400, about $970 per week.

As Ross Eisenbrey argued in a paper written a few years ago (for the 75th anniversary of the FLSA), that’s the 1975 threshold, adjusted for inflation. To us, that level made most sense for a variety of reasons:

The salary threshold is one way we avoid labeling someone a “manager” while paying them what are clearly non-managerial wages. So you want a threshold well above the median wage, which in our economy tends to be the wage paid to the typical production, nonsupervisory employee, someone who clearly should be paid overtime. When the Ford administration raised the salary threshold in 1975, it was 1.57 times the median wage. When Ross and I did our research, the median wage today was $16.70 per hour. Were we to update that same ratio—1.57 times the median wage—you’d get around $26.20 an hour, $1,050 a week, or $54,536 a year. The administrations $970 per week fits neatly in that ballpark.

Earlier analysis by policy makers who still understood the intent of the FLSA argued that the salary threshold should be “considerably higher” than the level of newly hired “college graduates just starting on their working careers.” The 1950 rule set the level 25 percent above the college entry-level wage; applying that same ratio today would yield a salary of $1,000 a week, again, in the ballpark of the president’s new rule.

The Bureau of Labor Statistics publishes data on supervisory workers by occupation and median weekly earnings (bona fide supervisors should typically be exempt from OT). For management occupations, the BLS breaks out four levels of supervisory responsibilities, and the median weekly earnings range from $1,520 to $3,995. In other words, by this metric, the new threshold is well below a level associated with supervisory, and presumably exempt, duties on the job.

BLS grades the responsibilities of occupations by a metric they call “leveling factors” (scores given to each occupation based on its demands for skill, knowledge, and responsibilities). They find the hourly wage of about $24 ($970/40) to be consistently below level 7 (out of 15), fully consistent with nonsupervisory responsibilities.

Yes, that’s all pretty weedy and wonky. Here’s the way the president put it:

Right now, too many Americans are working long days for less pay than they deserve. That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work.

This week, I’ll [present] my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t.

Trust me on this: you’d be very hard pressed to come up with a rule change or executive order—i.e., non-legislation—to lift the pay of this many middle-wage workers. That’s important, because we live in a time when the bargaining power of many who depend on their paychecks is much diminished relative to the clout and power of those whose income derives from their wealth portfolios.

This isn’t the first time in our history when such conditions prevailed. In fact, the FLSA was born of the acute realization that one role of government was to help rebalance those powers, to stand up for those who, absent rules like OT, risked exploitation, overwork, and inability to claim their fair share of the productivity growth they themselves were helping to generate.

All the president did Monday was to put a powerful thumb on the scale to add some balance on behalf of working people. And for that he deserves our thanks.


Normally I lean far right on issues like this, but I have to say I am with the President on this one. (Maybe it is the flu shot I took half a year ago.) I think "salary-exempt" status gets abused and applied to people who really should be getting overtime pay.

Here is another article about who qualifies as Salary Exempt.

Spoiler :

If an employer is covered by the FLSA, it must pay overtime to all eligible employees unless they fit into an exception to the law. If you fall into one of these exception categories, you are "exempt" from the federal overtime law, which means you are not entitled to overtime (remember, even if your employer isn't covered by the FLSA, you may be entitled to overtime under state law):
- executive, administrative, and professional employees who are paid on a salary basis (see below)

. . . .

Administrative, Executive, and Professional Employees
Probably the most common -- and confusing -- exceptions to the overtime laws are for so-called "white collar" workers. Employees whom the law defines as "administrative, executive, or professional" need not be paid overtime.
To fit into one of these exemption categories, you must be paid on a salary basis and must spend most of your time performing job duties that require the use of discretion and independent judgment.

You are paid on a salary basis if you earn at least $455 per week and you receive the same salary every week, regardless of how many hours you work or the quantity or quality of the work you do.
There are a few circumstances in which an employer may pay a salaried worker less than a full salary for a week -- for example, if the employee takes a couple of days of paid sick or vacation leave, or takes time off under the Family and Medical Leave Act. Generally, however, if an employer docks an employee's pay (for taking a personal day or not meeting a sales target, for example), then the employee is not paid on a salary basis and is entitled to overtime. (For more information on when pay docking is allowed for salaried employees, see Nolo's article Legal Limits on Pay Docking and Unpaid Suspensions.)

. . . .

Not every employee who earns $455 or more per week is exempt from overtime. You must also be performing certain types of work -- generally, work that requires an advanced degree, is managerial or supervisory in nature, or requires you to make relatively high-level business decisions. Here are the basic requirements for the administrative, executive, and professional exemptions.

An administrative employee must perform office or other non-manual work that is directly related to the management or business operations of the employer or its customers, and must exercise discretion and independent judgment regarding significant issues.

An executive employee's primary duty must be managing the employer's enterprise or a recognized division or department of that enterprise; the employee must regularly supervise at least two full-time employees (or the equivalent) and must have the authority to hire and fire or have significant input into hiring and firing decisions.

A professional employee's primary duty must either be performing work that requires advanced knowledge in the field of science or learning, of a type that is usually attained through an advanced course of study; or performing work that requires invention, imagination, originality, or talent in a recognized creative or artistic field.


So it looks like the qualifications are: $23,660 per year and oversight of two or more employees.

I thought the spirit of the rule was if you are "salary exempt" your employer is paying you so much money that calculating your hourly rate is redundant and you are generally expected to be working many hours in a week if required.

Thoughts?
 
Anything that disrupts Walmart/Target et al's [feces]head business model can only be a good thing.
 
He raised it further than was rumored, so that's good news. Only complaint is that it should have been done years ago.
 
The second article you published hasn't been updated to the new figure.

Employers have been misusing the salaried employee classification for decades. It is about time it was finally addressed, as Antilogic just mentioned.

Now, a word from the conservative congressmen, their overlords, and their minions at Fox News who will claim this is the end of the world as we know it. That Obama is literally destroying American business by forcing them to no longer exploit human being so badly.

Also, expect it to be changed right back if a Republican becomes the next president.
 
Isn't the problem still that

In this case, the reconnection involves the updating of labor standards introduced in the Fair Labor Standards Act (FLSA) of 1938, legislation that included a national minimum wage and time-and-a-half pay for hourly and certain salaried workers after 40 hours of weekly work.

places like Walmart will make sure that most of their employees work 38 or 39 hours a week? etc. ?
 
Except for managers, Walmart employees aren't salaried for the most part. But they will now be forced to pay them far more than they typically made before. Or they will have to pay the managers overtime.
 
This is fantastic news. This proposal bumps it up to $50,400, by the way, not $23K (the old number). Our wage and hour regulatory framework is in need of a serious upgrade (for worker's benefit) and our exemption standards are totally out of wack with modern labor. The salary threshold was in serious need of an upgrade--someone making $25k a year should never be exempt from overtime. (In my opinion it should be tied to regional cost of living.)

The way the exemption works (in greatly simplified terms): if you perform the duties of the exemption category (e.g., you supervise a certain number of people, or you are a licensed professional in a specific profession) AND you make over the salary threshold on a salary basis (i.e. your paycheck never changes from payday to payday, other than receiving bonuses) then you are exempt. It is much much much more complex than that in practice but that's the general idea: you need BOTH things to qualify.

The "spirit" of the original rule was twofold: that "important" high level workers had leverage at their job to negotiate fair wages for themselves and did not need overtime, and also at the time (the New Deal era) we wanted to encourage employers to hire more workers if they wanted to avoid paying OT. These days, people who are not really that important--essentially glorified customer service reps and salespeople at financial institutions & big companies, for example etc.--get shoehorned into these exemptions (usually the administrative exemption) even though they have zero leverage at their job and are totally replaceable.
 
You didn't have to make $23k or less to be a non-exempt employee (someone who receives overtime). This only affects management level employees, not everyone.
 
You can be non-"management" and still exempt, the executive exemption is only one category. This change affects anyone in any exemption classification with a salary under the new threshold. They will either require a raise or now be eligible for OT.

Or get fired, I suppose.
 
It's good but if you think these managers at mcdonald's and walmart's are suddenly going to make overtime I think you are fooling yourself. Most likely they'll simply be capped at 40 hours a week and they'll hire some more part-time managers to compensate (which I guess is a good outcome, more hiring). It's good though, people really ought not to work so much, it isn't healthy. I think that's the issue, that these manager's were expected to work 45-55 hours a week or get bad performance reviews.

I think my work does it right. I'm salaried, make way above the new threshold. They calculate my rate as my salary / 2080 hours = hourly rate. I get paid straight time OT (not time and a half) on anything beyond 9 hours a weekday and anything on weekends. It provides incentive to do extra work when it's available without opening it up for abuse. It's a good deal for the company because we aren't forced to work tons and they get a very good value for extra work as well.
 
It's good but if you think these managers at mcdonald's and walmart's are suddenly going to make overtime I think you are fooling yourself. Most likely they'll simply be capped at 40 hours a week and they'll hire some more part-time managers to compensate. It's good though, people really ought not to work so much, it isn't healthy. I think that's the issue, that these manager's were expected to work 45-55 hours a week or get bad performance reviews.

Then it is working as intended!

However in my experience, what usually happens is people at demanding jobs who are not "authorized" to work overtime wind up simply being forced into working off the clock and/or not reporting overtime in order to finish the tasks they are assigned. All without any express order to work off the clock, just implied, so it's harder to prove.
 
If my boss asks me to work overtime without compensation, I can just go to HR and report him. What protections do American walmart workers have for such things? Do they have a way to report any injustice without the fear of being fired?

I say "AMerican walmart workers" by the way while I realize that their Canadian equivalents likely have similar issues. It's just that we're talking about America in particular, so
 
You can do that here too. Technically it's unlawful retaliation if you complain about an overtime violation and are then fired. Technically.

To be honest I imagine our protections for that sort of thing are, at least on paper, on par with Canada's. I'd speculate the bigger issue is there is more of a cultural difference between here and there with what we expect people should just "put up with" at work.
 
All the president did Monday was to put a powerful thumb on the scale to add some balance on behalf of working people. And for that he deserves our thanks.

Ugh, why did they have to say that with words like those.
 
If my boss asks me to work overtime without compensation, I can just go to HR and report him. What protections do American walmart workers have for such things? Do they have a way to report any injustice without the fear of being fired?

I say "AMerican walmart workers" by the way while I realize that their Canadian equivalents likely have similar issues. It's just that we're talking about America in particular, so

You can file a complaint with the National Labor Relations Board (NLRB) and/or the Department of Labor, then if it gets really bad, it can escalate through the judicial system up to and including the Supreme Court.
 
You can be non-"management" and still exempt, the executive exemption is only one category. This change affects anyone in any exemption classification with a salary under the new threshold. They will either require a raise or now be eligible for OT.

Or get fired, I suppose.

Yes, but that definition is super narrow and very hard to get through the Labor Department. In HR it is generally understood that if you are going to make $50+ and are going to be non-exempt, they prefer you (and most workers prefer) to be a contractor, consultant or a contingent employee rather then a full time employee.
 
You can't just magically make employees exempt from wage and hour protections via designating them as something else. For example you can't just say "you're an independent contractor now" while the employee still does the same job.

It always boils down to what the employee actually does and how much they get paid for doing it. What the employer calls them is mostly meaningless, other than making the employee think everything is totally hunky dory. "I'm an Account Manager, I must be exempt!"
 
I don't think this goes far enough though. I would like to see a law that requires employers to state how many hours are considered standard for every single position, and then be required to pay overtime for any time worked over the stated "standard hours". That way employers couldn't get around paying overtime by only hiring part time employees since even part timers would be eligible for overtime under such a law.

For example: the law I would like to see would require an employer to tell someone upon hiring "we are hiring you for a 25-hour work week." So if the employee is required to work longer (say, a retail cashier during the holiday shopping season), and ends up working a 30-hour week, that extra 5 hours would be paid at the overtime rate (which in my ideal world would be double pay, instead of time-and-a-half).
 
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