Overtime Pay Gets Overhaul

NEW YORK (MainStreet) — Last March President Obama announced his intention to update the salary threshold for overtime pay, which the Department of Labor is expected to address this fall. On Wednesday, the left learning Economic Policy Institute came out with its recommendations on point.

Read More: Overtime, Over Budget? How Your Business Can Plan for Overtime Hours

Currently the U.S. salary threshold is set at $455 per week, meaning that an employer can exempt anyone earning more than that from time-and-a-half pay for working more than 40 hours per week. The threshold has only been adjusted once in the past 39 years, meaning that decades of inflation have taken their toll on its real value. While today it only applies to workers earning up to $23,660 per year, in 1975 it applied to anyone making up to $51,168 in inflation-adjusted dollars. This collapse has reportedly led to a quiet industry of flipping low paying jobs to salaried positions, then demanding 60- to 70-hour work weeks.

Read More: Should Overtime Laws Apply to All the Time Spent at Work or Just Some?

The EPI proposes returning the salary threshold to its 1975 value by setting it to $948 per week. According to researcher Heidi Shierholz, this would let an additional 6.1 million workers qualify for overtime pay. The rule change would particularly help women, minorities and young workers.

"Raising the salary threshold for overtime will help low-paid managers and professionals," Shierholz said in a press release, "especially women and people of color, who are not being compensated when they work over 40 hours a week."

It would also address a modern distortion in the salary system, which was designed to serve professionals and managers with substantial control over their own working environments. As originally contemplated, those in charge of a workplace or who have real bargaining power can be exempted from overtime pay, while those who have little say in their hours get the combination of protection and incentives offered by making labor 50% more expensive after an eight hour day.

The erosion of the salary threshold's real value has seen this design gradually fail, however, as it protects fewer and fewer workers.

"The overtime salary threshold no longer comes close to being a reasonable cut off for identifying workers with enough individual bargaining power that they do not need the overtime protections of the FLSA," writes Shierholz in her research, referring to the Fair Labor Standards Act. "Unsurprisingly, examples of abuse of salaried workers making above this threshold are rampant."

--Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.

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