Capital & Main: Will the Biden Administration Deliver on Overtime Pay?

The Labor Department is readying a rule that could allow millions more Americans to earn additional wages.

The typical American is working more hours per week — especially during the COVID pandemic — and yet only a fraction of employees qualify for overtime pay.

More than half of full-time American employees work at least 41 hours a week, according to a Gallup survey. About 18 million of them toil more than 50 hours each week, according to the Organization for Economic Cooperation and Economic Development.

Many young workers can be forgiven for not knowing, but a workload of more than 40 hours in a week has long been considered “overtime,” worth 150% of the normal wage starting at hour 41. These days, though, just 15% — or three out of every 20 workers — qualify for overtime pay

That’s a marked change from the mid-1970s, when overtime pay was the norm. More than 60% of salaried employees qualified for the extra income in 1975, making their access to extra pay four times more likely than it is today.

In the 47 years since, mortgages and rents in much of the country have soared, college tuition has followed suit and retirement savings have shriveled for many Americans. So it is worth asking a simple question on behalf of the nation’s workers: What happened to our overtime pay?

The easy answer is that the income threshold for people to qualify for overtime pay hasn’t come close to keeping up with inflation or the cost of living since Richard Nixon was in the White House.

Amid aggressive lobbying by corporate interests and pushback from fiscally conservative lawmakers, the threshold hardly increased since Watergate, and remained stuck at just $23,000 per year from 2004 until 2014, when the Obama administration tried to lift it to $47,000 as part of an updated rule that it calculated would have made about 4.2 million additional workers eligible for overtime. But 21 states and business groups like the U.S. Chamber of Commerce sued the administration, asserting government overreach, and a federal judge rejected the new rule that included the broadening of overtime pay.

Federal law currently requires overtime pay only for employees who earn an annual salary of less than $35,568.

Rather than appeal the judge’s decision, which was criticized by many unions and worker advocates, the Trump administration proposed a new rule in 2019 that elevated the overtime wage threshold increase to just over half what the Obama administration had sought.

The result is that federal law currently requires overtime pay only for employees who earn an annual salary of less than $35,568, although many such workers are excluded because they work in specific sectors determined by the Department of Labor, or because they engage in managerial duties.

Now the Biden administration is overhauling the rule in ways that are expected to sharply increase the number of Americans who qualify, which should help more workers earn a living wage. While the specific threshold proposal remains uncertain, sources close to the Labor Department tell Capital & Main that a decision is likely in the fall after agency staffers make the necessary economic calculations and department attorneys craft a legal analysis that they think will withstand possible court challenges. They must also draw up a political strategy able to overcome the opposition of fiscally conservative lawmakers.

“They’re still looking at the economic, legal and political read on the situation and trying to decide where they’re going to land,” says a corporate lobbyist familiar with the agency’s process.

There is a strong push from progressives for bold action on overtime, with more than 100 groups ranging from labor unions to civil rights groups sending a letter in December to Labor Secretary Marty Walsh urging the agency he helms to raise the threshold “substantially higher than what was proposed during the Obama administration.”

They want to see it set at a level that applies to at least the 55th percentile of earnings of full-time salaried workers in the country, which would have been $73,551 in 2021 and which, according to Economic Policy Institute projections, will increase to around $82,745 by 2026.

“When you talk to workers, it’s as much about getting their personal lives and time back as it is about earning more, and reclaiming the 40-hour workweek.”

~ Paul Sonn, state policy program director, National Employment Law Project

The Labor Department may also reportedly change the overtime exemption on managers so that some of them can also earn overtime. Progressive groups claim that companies abuse the managerial overtime exception by “deliberately understaffing and instead relying on low-paid, salaried managers working unpaid long hours to staff their operations,” the letter to Walsh states.

One worker described her experience in the letter. “Because our overtime hours are free for the company, they [made] us work 60 to 70 hours a week,” wrote Paige Murdock, who managed a Dollar General store in Eliot, Maine. “I was working so much I couldn’t make it to my church. My family was always asking, ‘Why aren’t you at home, mom?’ And most of my hours weren’t even spent managing the store, but instead stocking shelves or running the cash register since we never had enough staff.”

California, Washington and New York are among the states that have recently adopted their own strong overtime protections with higher salary thresholds, and they apply to a broader range of industries, but most states simply abide by federal rules, which helps explain why advocates are pushing the Labor Department to take strong action.

“When you talk to workers, it’s as much about getting their personal lives and time back as it is about earning more, and reclaiming the 40-hour workweek, which for so many low-salary workers is a thing of the past,” says Paul Sonn, the state policy program director at the National Employment Law Project.

Read the full article at Capital & Main

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