Earlier this month, the U.S. Department of Labor (DOL) announced a proposal to change the salary threshold under which workers are entitled to overtime pay — to $35,308 a year from $23,600 a year.
Under federal law, people who work more than 40 hours per week are supposed to be paid 1.5 times their regular hourly rate for each overtime hour unless they fall into one of the many overtime exemptions. The so-called “white collar” exemption allows employers to exempt salaried workers who make above the salary threshold from overtime pay if they are engaged in executive, administrative or professional duties. Once the proposed rule takes effect, anyone making under $35,308 per year (or $679 per week) will not qualify for the exemption.
If you are experiencing déjà vu reading this, that’s because we have been here before. Well, kind of. In May of 2016, after two years of research and public input, the Obama DOL also published a new rule updating the salary threshold to $47,476 per year (or $913 per week). That rule, however, was blocked by a federal court in Texas shortly before it was due to take effect.
The Trump Administration is taking credit for this proposed change, touting it for bringing “common sense, consistency, and higher wages to working Americans,” but they are actually leaving behind millions of Americans who can be required to work 50, 60 or 70 hours per week with no additional pay.
Because the 2016 rule included automatic increases every few years, by January 1, 2020 the salary level would be about $51,000 – $16,000 higher than the Trump proposal. According to the Economic Policy Institute, the difference in salary levels means about 278,000 people in North Carolina who would have benefited from the 2016 rule are left out by the 2019 rule. Nationally, that number is over 8 million.
Jumping to $35,308 from $23,600 may seem like a decent increase – and going from $23,600 all the way to $47,476 may strike you as extreme – but it is important to consider those numbers in context.
DOL used to periodically update the salary threshold to reflect changes in the economy and inflation, but the only time it has been updated since 1975 (setting aside the 2016 rule which was blocked) was in 2004.
According to the National Employment Law Project (NELP), in the 1970s, about 65% of salaried workers earned under the threshold and were entitled to overtime pay. The value of the salary threshold has eroded over time such that today, at the 2004 salary level, only 7% of salaried workers are under the salary threshold.
If the 1975 level was updated for inflation, it would be $55,000 today and would, likely, have the effect that the overtime requirement was originally intended to have: ensuring that overtime exempt employee are getting fairly compensated for extra hours.
Between now and mid-May, the public can and should comment on the current salary proposal.
Clermont Ripley is a senior attorney at the N.C. Justice Center’s Workers’ Rights Project.