If there is only one thing that every American worker who gets paid by the hour knows about labor law aside from the minimum wage, it is that employers must pay time and a half for all hours worked over 40 hours. What many American hourly workers probably don’t realize, however, is that some salaried workers are eligible for overtime pay as well.
This is all a result of the Fair Labor Standards Act (FLSA) of 1938 that introduced a national minimum wage, mandated time and a half for overtime in certain jobs, established a 40-hour work week, and prohibited most child labor.
Under current law, salaried workers who earn less than $455 per week are entitled to overtime pay for any hours over 40 that they work. Salaried workers who earn between $455 and $1,923 per week ($23,660 and $100,000 per year) are exempt from overtime regulations if they fall under the category of certain types of administrative, professional, and executive employees and meet certain guidelines. “Highly compensated employees,” those performing office work and making an annual salary of $100,000 or more, are also exempt if they “customarily and regularly” perform “at least one of the duties of an exempt executive, administrative or professional employee.” Other classes of workers who are exempt from overtime-pay requirements include certain outside salespeople and agricultural, live-in, computer, education, and transportation employees. Employees are not allowed to waive their right to overtime pay. Because independent contractors are not considered employees, they are not protected by the FLSA. These rules have been in place since August 2004.
The Obama administration wants to revise the overtime rules, including more than doubling the overtime exemption threshold to $50,400. Barack Obama raised the issue at the end of last month:
We’ve got to keep making sure hard work is rewarded. 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 head to Wisconsin to discuss 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.
That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.
On July 6, the U.S. Department of Labor announced a proposed “rule that would extend overtime protections to nearly 5 million white collar workers within the first year of its implementation.” The regulation “is a critical first step toward ensuring that hard-working Americans are compensated fairly and have a chance to get ahead.” The Department’s Wage and Hour Division has issued a fact sheet on the proposed rule that lists three key provisions:
The Notice of Proposed Rulemaking (NPRM) focuses primarily on updating the salary and compensation levels needed for white collar workers to be exempt. Specifically, the Department proposes to:
set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($921 per week, or $47,892 annually);
increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and
establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.
It should be pointed out that the Department “relied upon 2013 data in the development of the NPRM.” The new proposed salary threshold of $970 a week, or $50,440 annually, mentioned by Obama would begin in 2016.
The Notice of Proposed Rulemaking concerning overtime pay was published on July 6, 2015, in the Federal Register (80 FR 38515). Interested parties are invited “to submit written comments on the proposed rule at www.regulations.gov on or before September 4, 2015.”
The proposed rule is getting a lot of media attention. Liberals are generally claiming that the new overtime regulations will give millions of salaried workers a pay raise and create new jobs; conservatives are usually focusing on how this mandate will negatively impact employers through higher labor costs and employees through pay cuts, benefit cuts, or loss of flexibility in their schedule.
On NPR’s On Point on July 1, someone from the conservative American Enterprise Institute was brought on the show to face off against the liberals and make the case against the proposed overtime rule. Not once did he say that it was not the proper role of government to dictate wage and hour standards. Not once did he make the moral case for no government intervention in the economy. Not once did he maintain that everything concerning the employer/employee relationship should be entirely left up to the free market. Not once did he explain the nature of a free society.
In a free society, an employee’s overtime, just like his hour rate or salary, work schedule, work week, sick leave, lunch time, breaks, vacation pay, holiday pay, pension, life insurance, health insurance, family leave, severance pay, child care, and other fringe benefits would be determined solely by contract or agreement between an employee and his employer.
In a free society, there would be no Fair Labor Standards Act.
In a free society, there would be no U.S. Department of Labor.
In a free society, there would be no minimum-wage laws.
In a free society, there would be no government-imposed 40-hour work week.
In a free society, there would be no federal overtime-pay requirements.
In a free society, time off in lieu of overtime, or in addition to overtime, both of which are currently illegal for most occupations, would be options in the workplace.
In a free society, employees freely decide to take a job on the basis of the salary and benefits offered — including the availability and calculation of overtime pay.
In a free society, government would not interfere in any way with the employer-employee relationship.
Currently, some employers pay their employees double time in certain instances or offer increased pay for working nights and weekends. Neither of those things is required by the Fair Labor Standards Act. The same goes for vacation pay, sick pay, holiday pay, and severance pay. The Department of Labor says about these things, “These benefits are matters of agreement between an employer and an employee (or the employee’s representative).” This is exactly how it should be when it comes to overtime pay. Why it isn’t, is completely arbitrary on the part of the government.