Commentary: Businesses fighting effort to make OT rules fairer
The federal Fair Labor Standards Act (FLSA) generally requires that employees who work more than 40 hours a week receive overtime pay calculated at 150 percent of their regular pay rate. However, the FLSA exempts from this requirement employees who perform "executive," "administrative," or "professional" work. These are known as the "white collar" exemptions.
Under the current law, a salaried worker making as little as $23,660 per year can be classified as an overtime-exempt "executive," "administrator," or "professional." You read that correctly: Someone making $23,660 per year can be treated like the type of corporate "executive" who does not need the protections of our nation's overtime law.
Let's contemplate the real-life meaning of a $23,660 annual salary. In Pennsylvania, a salaried worker trying to raise a family of four on $23,660 per year is eligible for many social "safety net" programs. For example, the worker's children will easily qualify for free school meals and Medicaid. The family will easily qualify for food stamps and Section 8 housing vouchers.
Workers whose families qualify for free school lunch, Medicaid, food stamps, and subsidized housing simply are not the types of "executive," "administrative," or "professional" employees who should be exempt from the overtime pay laws. That's just common sense.
Fortunately, the U.S. Department of Labor recently updated the overtime regulations so that salaried workers classified as overtime-exempt under the white-collar exemptions must make at least $47,476 per year. This new minimum salary requirement will take effect on Dec. 1.
As importantly, the new salary requirement will be automatically updated every three years to keep up with wage inflation.
The new salary requirement is not too high. A salary of $47,476 per year merely places a worker at the 40th percentile of full-time salaried workers in the nation's lowest-wage Census Region. Moreover, it falls well below the nation's median household income of $56,516.
Yet, many big-business advocacy groups seem shocked by the $47,476 threshold and are trying to stop it from going into effect. The National Retail Federation, for example, calls the higher salary limit a "career killer" and says the new regulations are "full of false promises." House Speaker Paul Ryan (R., Wis.), meanwhile, calls the new salary requirement an "absolute disaster."
As typically happens when the Obama administration tries to implement progressive regulations, business-advocacy groups are gearing up for lawsuits challenging the regulations. And some members of Congress - including several Democrats - have introduced legislation that would phase in the increased salary threshold over three years and eliminate the automatic updates. These lawmakers are calling their bill the "Overtime Reform and Enhancement Act."
Workers' rights groups are taking a stand against that legislation. On July 14, the AFL-CIO wrote a letter to Congress opposing it. "The current salary threshold for overtime pay would be over $57,000 if it had kept pace with inflation since 1975." they wrote in the letter.
The Economic Policy Institute, also opposes the legislation, observing: "Failure to adequately update the salary threshold caused the share of the salaried workforce that was guaranteed overtime pay to fall from 49.6 percent to just 9.5 percent."
It should be an interesting few months in the courts and Congress. Let's see if the Obama administration's commonsense updates to our nation's overtime laws can finally become law.
Pete Winebrake is a lawyer at Winebrake and Santillo in Dresher. pwinebrake@winebrakelaw.com