By Ross Eisenbrey, Economic Policy Institute
One year ago, the U.S. Department of Labor issued a final rule to update the Fair Labor Standards Act’s overtime rules. The old rules—written by the Bush administration in 2004—have a loophole that leaves millions of salaried employees without the right to overtime pay (and even without the right to be paid the minimum wage). An employer may legally require salaried employees earning as little as $23,660 a year to work 70 or 80 hours a week with no additional pay. If an employer determines that a salaried employee works in an “executive, professional, or administrative capacity” the employee’s effective hourly pay could fall below $6.00 an hour.
If the new rule had taken effect on December 1, 2016, as planned, 4 million employees would have become entitled to overtime pay and another 9 million would have had their right to overtime pay strengthened and clarified. In 2017 alone, workers would have gotten $1.2 billion in extra pay.
But Republican politicians and big business groups sued to block the rule, and a U.S. District Court judge in Texas blocked the rule from taking effect, not just in Texas, but nationwide. Obama’s Department of Labor appealed the case, but the Trump administration has repeatedly delayed the appeal while it figures out whether to side with the employees or with big business.
President Trump’s new Secretary of Labor Alex Acosta claims to agree that the salary level for exemption is too low, but testified that the Obama rule might have set it too high. He claims to agree that the level should be updated regularly, but says he doubts that adjustments should occur automatically, every three years, as they would under the Obama rule. He even speculated that the Department of Labor has no authority to require any salary level for exemption, even though the department has had a salary test for almost 80 years, ever since the law first took effect in 1938.
Congress should put an end to Acosta’s waffling and enact the Obama rule or even something more protective of employee rights. Legislation like the bill Sen. Tom Harkin and eight colleagues introduced in 2014, the Restoring Overtime Protection for Working Americans Act, would put an end to any claims that the secretary lacks authority to guarantee overtime pay for low- and mid-level salaried employees or to limit the exemption from overtime pay to high-paid executives, administrators, and professionals.
The Trump administration could save the right to overtime pay for 13 million employees by vigorously defending the Obama rule in court, but that seems unlikely.
Excluding low-paid salaried employees from overtime protection was not what Congress intended when it passed the Fair Labor Standards Act in 1938. The Department of Labor officials who wrote the first regulations and updated them periodically for more than 40 years understood that the law exempts only bona fide executives, administrators and professionals, and that a key test of whether they should be exempted is whether their salary is appropriate for their supposed status and responsibility. If you really are an executive, you should be paid an executive salary, not $23,660, which is less than the poverty level for a family of four. The current regulations are out of date and result in millions of employees working long hours without extra pay.
One year ago, the Department of Labor under President Obama updated its regulations to restore the salary level test part of the way back to the levels set in the 1940’s, 50’s, 60’s and 70’s. Back in 1975, President Gerald Ford’s Labor Department set the salary level for exemption at the equivalent of about $58,000 in today’s dollars, high enough to cover more than 50 percent of full-time salaried workers. The Obama rule set it $47,476, high enough to cover about 34 percent of full-time salaried employees—a compromise intended to make it easy for most businesses to adjust.
Congressional Republicans made plain their hostility to the rights of workers two weeks ago by passing a bill in the House of Representatives to allow employers to delay paying overtime for up to 13 months to employees who earned it. Siding with business CEOs over workers, President Trump’s advisors recommend that he sign the bill if it passes the Senate.
If the overtime rights Americans had back in the 1960’s and 70’s are going to be restored, it seems it will take a progressive Congress to do it.