U.S. Department Of Labor About To Issue New Regulations Expanding Overtime Coverage To Over 5 Million Workers

Sometimes, I start thinking there isn’t much difference between Democrats and Republicans, since a lot of them remind me of the kids in high school who were running for student council president. But then, when I look at some federal regulations, I am reminded that who is in the White House can make a real difference for millions of people. The recent overtime rules issued by the U.S. Department of Labor show that there can be a clear difference between the political parties.

In the private sector, workers must be paid time and a half for all hours worked beyond 40 in a week. Passed in the 1930’s, this law was designed to encourage employers to hire more workers, since millions were thrown into unemployment by the Great Depression[1]. The statute exempted from the overtime laws “executive, administrative and professional” employees, but left government regulators to enact rules distinguishing employees exempt from overtime from non-exempt ones.

In 2004, the Bush Administration passed rules which “updated” these regulations in a way that left millions of workers without overtime protection. A salaried employee who spent 99% of her time performing manual labor could still be exempt from overtime as long as she made over $455/week. See In Re: Family Dollar FLSA Litigation.

Under the new regulations in the process of becoming law, not only does an “executive” really have to work as one, but s/he must make at least $50,440/year. Regardless of what title or job duties the employer gives the employee, unless s/he makes at least $50,440/year, s/he must receive overtime pay after working 40 hours in a week.

The new regulations, however, are not a panacea, since many companies have reacted by either reducing wages or reducing the hours of employees about to become eligible for overtime for the first time. Since virtually all of these employees are not covered by union contracts, they are powerless to do anything about it. Nevertheless, some formerly exempt employees will receive a raise, and, in some instances, more employees will be hired to fill in for the unlimited hours employers were formerly able to require of their supposed “managers” without any increased cost. As one economist said, “Trust me on this: you’d be very hard pressed to come up with [another] rule change or executive order to lift the pay of this many middle-wage workers.”

[1] In 1933, the U.S. unemployment rate was 25%.