New proposal to determine wage
The Labour Department on Thursday proposed a new standard for determining which wage earners are exempt from overtime protections, effectively freezing out 3 million workers the Obama administration sought to protect.
Score this one: Employers 1, Workers 0. It’s a complicated bit of regulatory action. The 1938 Fair Labor and Standards Act, which sets minimum wage, overtime pay, recordkeeping and child labor standards, includes exemptions from overtime protections for workers whose primary responsibility involves managing part of the business, including overseeing other workers.
The intent was to offer protections for wage workers while preserving flexibility for traditionally white-collar jobs that tend to pay more but also require different working hours and conditions. Over time, the Labor Department has used a mix of job responsibilities and pay levels to differentiate between the two, something the courts have allowed, seeing wage levels as a proxy for the line between hourly workers and managers.
The annual wage level to determine who is exempted from overtime-pay rules was set back in 2004 at $23,360, and it hasn’t been adjusted for inflation since then. As a result, people now making what amounts to povertylevel wages can be considered management, relieving their employers of the requirement to pay them overtime (1.5 times their normal wages) for each hour over 40 worked in the same week.
The Obama administration, after a two-year review process, proposed raising that threshold to $47,476, still far below the $55,000 or so that labor advocates said would match the 2004 level, once adjusted for inflation.
More than 20 states, led by Nevada, sued to block the proposal, and a U.S. District Court judge in Texas agreed with the states in 2017. The judge held that, in essence, the administration had relied too heavily on the salary threshold and insufficiently on the nature of the job responsibilities. The Obama administration appealed, but that was put on the back burner ater President Obama let office and the Trump administration told the court that it was revising the proposal.
That’s what was released on Thursday, which immediately and properly drew protests from pro-labor activists.
Beyond reducing by millions the numbers of people who could have received overtime protections (though the proposal does offer protections to more people than currently have them), the new proposal also drops the Obama administration’s proposal to index future increases to rising salary levels. Without that indexing, the threshold now will likely be frozen in place until some future administration decides to go to bat for working people.