A lot has changed since 1975. The Soviet Union collapsed, we fought (and are fighting still) several wars in the Middle East, same-sex marriage is now legal across the United States, we have our first African-American president, we have the Internet. But what has changed only minimally is the salary level for determining which "salaried" workers are entitled to overtime. Seriously. While the Bush Administration made a minuscule adjustment in 2004, essentially a political smokescreen to avoid a real increase, that number is finally going to increase in a meaningful way -- the Economic Policy Institute deserves a lot of credit for pushing for this long-overdue update. The Department of Labor is announcing a significant increase in the threshold -- from $23,660 to approximately double that amount. What that means is that workers earning up to the new level, even if they are not called "hourly," will get overtime pay for their hours worked over 40 in a work week. In 1975, the salary basis test captured 60 percent of salaried workers; in 2015, only 8 percent of salaried workers fall below this level and earn overtime. While writing my book, Under The Bus: How Working Women Are Being Run Over , I discovered (with help from EPI's economists) just how much this change will help workers, particularly women of color.
The Fair Labor Standards Act (FLSA) established the requirement of minimum wage and overtime, but in a provision known as the "salary test," the law provides that employers need not pay either the minimum wage or overtime to workers they designate as "bona fide executive, administrative, professional and outside sales employees," so long as their daily tasks meet the DOL definition and they make more than $455 per week -- which is how $23,660 breaks down as a weekly wage. Clearly, outdated level has given unscrupulous employers a way to avoid paying low-paid staff overtime by calling them "salaried." Workers have had to challenge their denial of overtime when their employers tried to get out of the requirement by adding "manager" or "leader" to their title when their actual work consisted of serving fast food, shelving merchandise, or ringing up customers' purchases.
Contrary to the statute's original purpose, many workers put in the "salaried" category do little if any supervisory work. While in theory, "their duties must include managing a part of the enterprise and supervising other employees or exercising independent judgment on significant matters or require advanced knowledge," the reality is quite different. This loophole has allowed employers to tell women that as a receptionist or typist they are administrative or professional, while in fact they have little or no supervisory responsibilities. But what they do get, in addition to a nicer title, is the right to work overtime without overtime pay. The Bush administration used regulatory black magic to push more workers into this category in 2004. That DOL rule cost an additional 8 million employees their overtime pay. Even without chicanery, the rules have become so lax that many employees are called "salaried" who should be earning overtime under the FLSA's original purpose. According to EPI's Ross Eisenbrey, "under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you're responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt."
In a recent case, an employee, called a "store manager" by Dollar General, sued arguing that she had been improperly denied overtime. Issuing an initial ruling for the woman plaintiff, the court described the actual duties performed by the employee: "Hale spent forty percent of her time alone in the store, during which she supervised no one and she performed tasks typically done by a clerk. A juror could conclude that her mental management of the store, such as spotting empty shelves while performing menial labor, did not constitute management or supervision of others. Further, a reasonable juror could determine that the company's strict policies and stringent allocation of staff labor hours resulted in Hale forgoing true management duties in order to perform menial tasks so the store could simply remain open."
And in 2014, how many employees performing real "executive, administrative or professional" work make below $455 per week? Even with stagnant wages that's not plausible. Interviewed for a story on a proposed reform, Seth Harris, who had recently stepped down as deputy secretary of labor, expressed amazement that anyone would oppose the long-overdue fix. Calling the current salary level "laughably low," Harris noted that "it's only a few dollars more per week than the proposed new minimum wage would require for all workers." Indeed, some of these employees earn less than the minimum wage because of the number of hours without overtime they have to work-meaning that the number of workers earning at or below minimum wage is undercounted because salaried workers are not considered in calculating the minimum-wage workforce. Keeping the threshold low for salaried work makes it enticing to employers to work these employers well beyond forty hours because there is no overtime to pay at all.
The new regulation, which will also make it harder for employers to manipulate employees' job titles to avoid paying overtime, will have an enormous positive impact on women's wages. Women make up the majority of the workers who could start earning overtime, many of whom currently work well over forty hours per week without additional pay. Almost 30 percent of the affected workers are people of color.
Lifting the salary level alone will help many women earn a better wage. Tightening the definition will enable even more women access to overtime pay as workers will have more tools to challenge fraudulent designations. And increasing enforcement will also help deter employers from continuing to call workers "supervisory" or "salaried" or "white-collar" in order to avoid paying what the law requires. And for many women-domestic workers as well as office workers-coming under the overtime provisions will mean that they will actually have more time for their families and other pursuits -- but if they are indeed forced to work long hours, at least they will be paid for it.
*This piece is cross-posted at the Economic Policy Institute's Working Economics Blog.