The Labor Department on Thursday proposed a new standard for determining which wage earners are exempt from overtime protections, effectively freezing out 3 million workers the Obama administration sought to protect.
Score this one: Employers 1, Workers 0.
It’s a complicated bit of regulatory action. The 1938 Fair Labor and Standards Act, which sets minimum wage, overtime pay, record-keeping and child labor standards, includes exemptions from overtime protections for workers whose primary responsibility involves managing part of the business, including overseeing other workers.
The intent was to offer protections for wage workers while preserving flexibility for traditionally white-collar jobs that tend to pay more but also require different working hours and conditions. Over time, the Labor Department has used a mix of job responsibilities and pay levels to differentiate between the two, something the courts have allowed, seeing wage levels as a proxy for the line between hourly workers and managers.
The annual wage level to determine who is exempted from overtime-pay rules was set back in 2004 at $23,360, and it hasn’t been adjusted for inflation since then. As a result, people now making what amounts to poverty-level wages can be considered management, relieving their employers of the requirement to pay them overtime (1.5 times their normal wages) for each hour over 40 worked in the same week.
The Obama administration, after a two-year review process, proposed raising that threshold to $47,476, still far below the $55,000 or so that labor advocates said would match the 2004 level, once adjusted for inflation.
More than 20 states, led by Nevada, sued to block the proposal, and a U.S. District Court judge in Texas agreed with the states in 2017. The judge held that, in essence, the administration had relied too heavily on the salary threshold and insufficiently on the nature of the job responsibilities. The Obama administration appealed, but that was put on the back burner after President Barack Obama left office and the Trump administration told the court that it was revising the proposal.
That’s what was released Thursday, which immediately and properly drew protests from pro-labor activists.
Beyond reducing by millions the numbers of people who could have received overtime protections (though the proposal does offer protections to more people than currently have them), the new proposal also drops the Obama administration’s proposal to index future increases to rising salary levels. Without that indexing, the threshold now will likely be frozen in place until some future administration decides to go to bat for working people.
Where this becomes especially unfair is that as inflation and wages increase, people who are covered by the overtime protections lose them. So, over the years, employers get the benefit of unpaid labor from workers to whom they formerly had to pay overtime. Updating the threshold to a reasonable level just means that employers will have to start paying overtime to people who deserve it, but who have lost the protection through inflation.
Remember, this is the administration of a billionaire businessman with his own history of labor and wage abuses, who claims to be a champion for “forgotten” working Americans. Maybe he forgot.
Scott Martelle is an opinion writer for the Los Angeles Times. He is a native of Maine.