If an overtime proposal by the Biden administration is enacted, 3.6 million workers may become newly eligible for overtime pay.
A Sept. 8 announcement from the U.S. Department of Labor proposes a rule that would guarantee overtime pay for most salaried workers earning less than $1,059 per week, or roughly $55,000 per year.
The proposal would require time-and-a-half payment for hours worked over 40 in a week. Labor officials note the rule would not apply to those who are categorized as exempt executive, administrative or professional workers – referred to as the white-collar or EAP exemption. The salary threshold would be automatically updated every three years to reflect current earnings data.
A DOL web page devoted to questions about the proposed rule defines some of the terms in the measure. It states that to fall within the white-collar exemption, an employee generally must be paid a salary, meaning a fixed amount that does not fluctuate due to quality or quantity of work performed. Currently, that weekly salary level must be at least $684 per week or just shy of $36,000 per year.
The Fair Labor Standards Act states that non-exempt employees must be paid at least one and a-half times their regular rate of pay for hours worked in excess of 40 in a workweek.
The current standard salary level of $684 per week/$36,000 per year has been in effect since 2020, the information page notes.
A 2016 rule, proposed by the Obama administration after two years of discussion, would have nearly doubled the existing salary threshold for overtime pay $47,000 from $24,000. That rule was struck down by a court ruling, and in 2019 the Trump administration issued a rule setting the threshold at its current level of $36,000. That rule took effect in 2020.
Challenges to rule
David Overfelt, president of the Jefferson City-based Missouri Retailers Association, said the proposed $55,000 threshold – meaning workers making up to $55,000 must be paid overtime for hours worked over 40 – would have a dire impact on the business community. But he said he and experts he’s spoken to don’t think they have anything to worry about.
“There’s probably zero chance this will ever become effective,” he said. “It’s going to go straight to the courts.”
That would likely be about nine months from now, Overfelt said, and just as with the Obama administration rule, a court would probably rule against it. In August 2017, a U.S. District Court judge granted summary judgment to nearly six dozen business groups that challenged the rule by arguing that the DOL exceeded its authority and raised the salary threshold too high.
To qualify for the FLSA’s white-collar exemption, workers must perform certain executive duties. Part of the problem with the 2016 rule was that it made the so-called duties test irrelevant, according to the Society for Human Resource Management.
The judge also ruled the DOL did not have the authority to automatically adjust the threshold every three years, as proposed in 2016, according to SHRM, and with the new proposal.
“This is a rehash of a past attempt,” Overfelt said.
He added that there would be a strong impact on midsize and smaller commercial businesses and manufacturers.
“They would probably have to change what they consider management,” he said.
He added that if the new rule were enacted, the costs would be passed along to consumers.
“When more cost is put on the business community, the business community figures out how to live with it,” he said.
‘No impact’ for manufacturers
Michael Eaton, the Springfield-based executive director of the Missouri Association of Manufacturers, said he believes the proposed rule would have little to no impact on manufacturers.
“When we think of manufacturing jobs, those on the production floor, most are hourly employees, taking advantage of overtime opportunities when available, making time and a half,” he said. “The operations/production manager roles, for the most part, have a salary well above the $55,000 requirement, or have an hourly pay rate that they, too, take advantage of when working overtime.”
Eaton said that he observes most manufacturers taking care of their workers.
“In visiting and touring over 170 manufacturing operations over the last 30 months, there are several constants that we observe, those being pride, passion, a focus on culture, a strong appreciation of their workforce and a desire to take care of them. It’s family,” he said. “That mindset has been there long before any workforce shortage.”
The rule would have the biggest impact on industries such as retail, food and hospitality, where a large number of managerial employees would meet the new threshold. A spokesperson for the Missouri Farm Bureau declined to comment on the proposed rule.
Julie Su, acting secretary of Labor, offered a strong endorsement of the rule in a statement announcing it.
“For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones,” said Su. “I’ve heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don’t come anywhere close to compensating them for their sacrifices.”
DOL figures show nearly 30% of full-time salaried workers would be entitled to overtime pay under the new rule. That is double the 15% of workers who are currently eligible for overtime. In the 1970s, more than 60% of salaried workers were eligible, according to the Economic Policy Institute.
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