While our focus is on raising the minimum wage – protests, #Fightfor15 and all that – a bureaucratic move you may have missed will also do wonders for many workers’ paychecks.
A new rule from the U.S. Labor Department – finalized last month and taking effect Dec. 1 – will substantially increase the number of employees on salary who will get overtime pay.
Under the old rule, those making $23,660 or more a year were not eligible for time-and-a-half pay even when they worked more than 40 hours in a week. That threshold hasn’t changed since 2004 and clearly hasn’t kept up with inflation or wages.
Under the new rule, salaried employees making less than $47,476 a year must be paid overtime – covering an additional 4.2 million workers, according to the Labor Department. That includes 146,000 in California who earn less than that amount, but more than $41,600 a year, where the state’s own overtime ceiling kicks in.
According to one study, the new rule’s ripple effect will benefit many more workers. Nationwide, about 12.5 million (nearly one-fourth of all workers on salary) will be helped – either by getting overtime, not having to work more than 40 hours, or getting a raise to put them above the threshold, says the Economic Policy Institute.
In California, more than 1 million will be helped, based on the broader measure, and 27 percent of the salaried workforce will be covered by overtime, the study estimates.
This became an issue after horror stories about managers at retail stores being forced to work long hours without compensation.
Still, as you would expect, the business community is complaining and warning that salaried workers will get their bonuses and benefits cut, their hours reduced, or be reclassified as hourly employees. The Labor Department estimates the cost to employers at $1.2 billion in additional overtime pay, plus $300 million in administrative expenses.
The new overtime threshold is a little lower than the $50,400 that the Obama administration proposed last year, and it doesn’t change the “white collar” exemption for executive, administrative and professional employees who still won’t get overtime.
Still, some say it’s one of the most progressive actions that President Barack Obama has taken to guarantee that more middle-class jobs actually mean middle-class pay. The overtime threshold – which now covers only 7 percent of full-time salaried workers, compared to 62 percent in 1975 – will be automatically updated every three years.
To put the new overtime rule in place, Obama bypassed a gridlocked Congress during a presidential campaign where the three remaining candidates are all about helping American workers. It just goes to show how much power the president has – and how much it matters whom we elect.
By the numbers
The number of workers benefiting, and the share of salaried workforce covered by, a new overtime rule in selected states:
- Texas: 1.2 million, 37%
- California: 1.1 million, 27%
- Florida: 1.1 million, 42%
- New York: 982,000, 33%
- Arizona: 258,000, 36%
- Washington: 232,000, 27%
- Oregon: 124,000, 29%
- Nevada: 115,000, 36%
Source: Economic Policy Institute