By Heidi Shierholz, Economic Policy Institute
Federal law requires that people working more than 40 hours a week be paid 1.5 times their rate of pay for the extra hours, but exempts salaried workers who make above a certain salary threshold and are deemed to have “executive, administrative, or professional” duties. The salary threshold is meant to help protect salaried workers with little bargaining power—for example, low- or modestly-compensated front-line supervisors at fast food restaurants—from being forced to work unpaid overtime. But, at $455 per week (the equivalent of $23,660 per year), the overtime threshold has been so eroded by inflation that it is now less than the poverty rate for a family of four. If the rule had simply been adjusted for inflation since 1975, today it would be well over $50,000.
In 2016, the Department of Labor published a highly vetted, economically sound rule that would have increased the threshold to $913 per week ($47,476 per year). However, a district court judge in Texas ruled that the new overtime threshold is invalid. While the Trump DOL plans to appeal the judge’s flawed ruling, they will not defend the $47,476 threshold. Instead, they intend to propose a new threshold, and have asked the court to stay the appeal while they engage in new rulemaking.
DOL officials have repeatedly indicated that they would prefer a salary threshold far below $47,476—rolling back protections for millions of workers. It is likely that they are considering proposing a new threshold of around $31,000.
Where does that number come from? In 2004, under George W. Bush, DOL increased the overtime threshold, but fell far short of fully adjusting it for inflation since its prior increase almost 30 years earlier, in 1975. The $31,000 figure is the 2004 threshold adjusted for inflation. Meanwhile, if the 1975 threshold had been adjusted for inflation, it would be well over $50,000. Labor Secretary Alexander Acosta has suggested that simply adjusting the weak 2004 threshold for inflation might be appropriate. Additionally, in a July Request for Information, DOL specifically asked for public comment on whether updating the 2004 salary level for inflation would be an appropriate basis for setting the salary level, further suggesting that that level is under strong consideration by the department.
EPI estimated that the 2016 rule, with a salary threshold of $47,476, would have provided new or strengthened overtime protections to 12.5 million workers. Using that same data, we find that a threshold of $31,000 would provide new or strengthened protections to only 3.4 million workers. In other words, 9.1 million workers—close to three-quarters of the 12.5 million—would be left out. The table below shows how many people in each state would not get new or strengthened overtime pay protections if the threshold were set at $31,000 instead of $47,476. Setting the salary threshold below the 2016 level would roll back a long overdue wage increase for American workers across the country.
Workers in each state who would not get new or strengthened OT protections if the threshold is set at $31,000 instead of $47,476
|State||Number of workers getting new or strengthened protections as a result of raising the threshold to $47,476||Number of workers getting new or strengthened protections as a result of raising the threshold to $31,000||Number of workers getting new or strengthened protections under $47,476 threshold who woud be left behind if the threshold were dropped to $31,000||Share of workers getting new or strengthened protections under $47,476 threshold who would be left behind if the threshold were dropped to $31,000|
|District of Columbia||29,000||8,000||21,000||72.4%|
Notes: For mor information see Ross Eisenbrey and Will Kimball, The new overtime rule will directly benefit 12.5 million working people: Who they are and where they live, Economic Policy Institute, 2016
Source: EPI analysis of the U.S. Department of Labor’s proposed (July 6, 2015) and final (May 18, 2016) rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” 29 CFR Part 541; and Current Population Survey Outgoing Rotation Group microdata, 2015