Time for a celebration. And the U.S. Department of Labor has supplied a cause, as you may already have read. After far too many years and a lengthy process, it’s issued a final rule updating overtime requirements.
The rule reflects some concessions to upset employers. Basically, it sets the threshold below which all salaried workers must receive one-and-a-half times their regular pay when they work more than 40 hours a week to $913 a week, rather than the estimated $970 originally proposed.
The lower threshold reflects a different standard — the 40th percentile of what full-time salaried workers get paid in the lowest-wage region defined by the Census Bureau, rather than the national average. The rule uses the same standard for prospective updates.
Nevertheless, a very large initial increase from the $455 a week that’s been in place since 2004 — and, for the first time, adjustments that won’t require a new rulemaking. These will ensure that an ever-increasing number of employees doing basically the same work for only a bit more pay can’t be classified as over-time exempt.
The Labor Department says that somewhat over 4.2 million workers — 19% of those now exempt — will gain overtime protections or a raise. These are workers paid less than the new threshold.
But it another 8.9 million will benefit, its says elsewhere. The difference between them and the others, economist Jared Bernstein explains, is that they should already be getting overtime pay, but aren’t because employers have taken advantage of loose duty definitions to classify them as exempt.
They include assistant restaurant managers, as I’ve written before, and other workers designated as managers who spend most of their time doing work that requires minimal skills and no decision-making to speak of.
The Economic Policy Institute puts the number of workers directly affected at 12.5 million, saying it’s used both the Labor Department’s proposed and final rules and data from the Census Bureau’s ongoing Current Population Survey.
Both the Department’s and EPI’s impact analyses include a variety of breakouts — by gender, for example, race/ethnicity, age and highest formal education level.
They also break out the total by state (and would-be state). So we learn that roughly 11,000 more workers in the District of Columbia may have to get paid overtime — this, according to the Labor Department.
EPI estimates 29,000 — 16% of District workers, instead of 4%. The big gap here — and other differences — reflect EPI’s view that the Labor Department underestimated the number of workers who should have been receiving overtime pay, but weren’t.
One way or the other, substantially more workers — and not only in the District, of course — may get paid more. They won’t all necessarily get paid for the extra hours they put in, however.
As Bernstein suggests, employers may bump up some workers’ salaries to just above the new threshold — and then presumably use those squishy duties tests to exempt them from overtime pay. The Labor Department sees this prospect too.
Employers may instead just hire more workers so that everything that needs to get done gets done within the 40-hour per worker week. EPI estimates 120,000 new retail jobs nationwide — the same estimate another source made when Labor proposed the higher threshold.
We simply don’t know how employers will respond. We can be pretty sure, however, that they’ll have a harder time taking advantage of workers they’ve exempted.
The Vice President of the National Association of Manufacturers, which strongly objects to the new rule, inadvertently discloses the abuse of exemptions.
Small manufacturers, she says, “cannot afford the burdens of a 99 percent salary increase for management employees” now exempt. Think how little they’re paying those employees, who’ve had to work extra hours for free.
The National Restaurant Association says basically the same thing. And it warns that restaurant owners may shift salaried employees back to paid-by-the-hour positions, suggesting that they’ve extracted extra hours and now won’t.
It also says it will support legislation to block the new rule — either directly or by denying the Labor Department funds to enforce it. It’s got some muscular allies — the National Federation of Independent Businesses, for example. And they won’t have to start from square one.
So we can indeed celebrate –and hope for the best. Because the next administration could do away with the rule. Clearly wouldn’t if it’s Clinton’s, but ….