Today, Secretary of Labor Tom Perez announced that the Department of Labor has drafted a rule to reform overtime pay protections. Along with raising the minimum wage—which would rise to $12 an hour by 2020 under the Raise the Wage Act which was introduced in Congress last week—requiring that workers with modest salaries are compensated for all the hours they work would boost the earnings of millions of hard-working women and men and strengthen our communities and economy.
A little history: the federal Fair Labor Standards Act of 1938, in addition to setting a minimum wage, established the basic 40-hour workweek. Hourly workers and workers with salaries below a specified threshold, set by regulation, are entitled to overtime pay—at least time-and-a half their regular rate of pay—for hours in excess of 40 per week. The Act exempts more highly paid professional and managerial employees from the overtime rules.
However, the salary threshold for the overtime exemption has been increased only once since 1975. It now stands at $455 per week or $23,660 annually—less than the poverty threshold for a family of four. To be exempt, in addition to having a salary above the threshold, workers’ jobs also must involve independent judgment and managerial responsibilities. However, many employers abuse the overtime exemption, giving workers a little bit of authority so the employers can claim the exemption for workers who actually spend most of their time doing the same tasks as the employees they “supervise.” For low-level supervisory employees, a “promotion” may mean not only the loss of overtime pay but a dramatic increase in hours, even as their hourly co-workers cannot get all the scheduled hours they would like.
The Economic Policy Institute analyzed the impact of raising the salary threshold to $984 per week or $51,168 annually. This would restore it to the 1975 threshold adjusted for inflation. Raising the threshold would disproportionately benefit those who are at the low end of the salary scale for managerial and professional employees—specifically, women, Blacks, Hispanics, workers under age 35, and workers with lower levels of education. With a $984 per week threshold, over 6 million workers would be newly eligible for overtime protections—54 percent of them women.
Details of the Department of Labor’s proposed overtime rule are not yet available because it is now being reviewed by the Office of Management and Budget (OMB). As soon as the rule is published for public comment, we’ll let you know—and hope you’ll support restoring effective overtime protections for millions of working women and men.