It took longer than expected, but the US Department of Labor has finally come up with a new plan to pay some American workers overtime. The proposal on which American workers are eligible for overtime pay was submitted to the White House Office of Management and Budget (OMB) on Tuesday morning and should be announced publicly in the coming weeks.
Being paid overtime is the unicorn of the US workers’ benefits. Only hourly paid workers and those earning $23,660 a year or less in salary are guaranteed overtime pay for any hours beyond a standard 40-hour workweek. In 2013, 11% of salaried workers and about 18% of all workers – both salaried as well as those paid by the hour – were eligible for overtime. The $23,660 salary threshold for overtime pay is not adjusted for inflation and has basically remained unchanged since 1975. That, however, is about to change.
“After extensive research, study and careful analysis, we have submitted the proposed rule to the Office of Management and Budget for review. In the near future, the public will have an opportunity to weigh in and help us craft a final rule,” the labor secretary, Tom Perez, wrote in a blogpost on Tuesday.
In March last year, President Obama instructed the department to devise new rules that would make more workers eligible for overtime pay, which is time-and-a-half of their regular pay. The salary exception for overtime was “originally meant for high-paid, white-collar employees”, Obama said at that time, pointing out that the categories of workers have changed substantially since the rules were originally implemented.
“If your salary is even a dollar above the current threshold, you may not be guaranteed overtime. It doesn’t matter if what you do is mostly physical work like stocking shelves; it doesn’t matter if you’re working 50 or 60 or 70 hours a week – your employer doesn’t have to pay you a single extra dime.”
The threshold of $455 a week was last updated in 2004. In addition to receiving a salary, overtime-exempt workers must pass a “duties test”, proving that they are a supervisor, or that they are in charge of two or more full-time employees for any fraction of their work week. As a result, some employers avoid paying overtime by giving their workers minimal responsibility.
Many expect the proposed rules to increase the salary threshold in order to expand the pool of eligible workers. It is not yet known what the proposed threshold is.
“Most people believe that if they are paid a salary, they are not entitled to overtime pay. It’s as simple as that, and that’s almost where we have gotten. The salary threshold is so low now that it doesn’t protect very many people,” said Ross Eisenbrey, vice-president at the Economic Policy Institute.
“If it were raised to $50,000 or $55,000 and people were told if you make less than that, you are guaranteed overtime pay for your hours beyond 40, that’s a simple enough rule that the Department of Labor could communicate it. People would understand their rights and we would have much higher compliance with the 40 hour workweek.”
The EPI would like to see the threshold increased to about $51,000, making it close to what it was in 1975 when 65% of salaried workers were eligible for overtime pay. A $51,000 threshold would mean that an additional 6.1 million workers would be eligible for overtime pay.
The overtime threshold should be set at least $51,000/year. Tell the president it’s #Time4OT. http://t.co/wx5pntIo2i pic.twitter.com/t4yEygszEY
— Economic Policy Inst (@EconomicPolicy) January 26, 2015
The department was first expected to announce the new rules in November of last year, a spokesman told the Guardian in July. A few months later, in December, the Guardian was told that “updating the overtime regulations is scheduled for February 2015”.
It turns out that overtime is a contentious topic, with labor unions and workers’ groups lobbying for a higher salary threshold, and businesses lobbying for lower.
“I think it’s taking so long, because it almost always does. There is nothing unusual about rule-making taking a long time,” Eisenbrey told the Guardian back in December.
“I think in this case they have a lot of options about what they might do. The rule that they are updating is broken in about15 different ways. If they tackle all 15, it’s a much more complicated rule-making. They might only address one or two of the problems in the overtime rules.”
A threshold salary of $51,168 a year is the least the administration should do, according to the AFL-CIO president, Richard Trumka. His federation will not settle for less, he said.
“Why would you settle for a figure that excludes millions of people when they’re not going to support that, either? The president should go full throttle on restoring the 40-hour workweek and not dilute this opportunity for raising wages,” said Trumka.
After the OMB review, the proposed rules are expected to be released to public for a 90-day comment period. There is no date by which the final rule must be written and issued. Eisenbrey warned that it could take as long as 12 months before the final rule comes out. The final rule would determine the date by which the new threshold would be implemented.
