On Friday January 10, 2014 The New York Times published an op ed by Ross Eisenbrey of the Economic Policy Institute. The op ed suggested a reform that President Obama could enact through executive action.
Currently under the Fair Labor Standards Act regulations most exemptions only require that a “salaried” employee be paid at least $455 a week to qualify for the exemption. Normally an employee who works more than 40 hours in a week must be paid 1.5 times their hourly rate for each hour of forty in that week. Under the current regulations a salaried employee who meets certain duties tests can make as little as $22,000 a year and be exempt from overtime pay. The article points out that the $455 figure is only $2 a week more than the poverty level income for a family of four.
Mr. Eisenbrey proposes that the raised to $970 a week. This is about $46,500 before taxes. He takes the $970 figure based on the ratio to minimum wage when the Ford Administration raised the threshold. At that time the threshold was 1.6 times minimum wage. 1.6 times the minimum wage is a little more than $1000 a week, so Eisenbrey is calling for an amount on the low side of what was previously the case.
Raising the threshold will effectively make more workers eligible for overtime pay. Making more workers eligible for overtime will have a number of benefits. One important benefit of raising the threshold is that more workers will be paid overtime. Another benefit Eisenbrey identifies is that more overtime eligible workers will mean that employers will hire additional workers to perform work rather than pay the more expensive overtime rate of time and a half. Encouraging the sharing of hours among more workers was one of the goals of the Fair Labor Standards Act.
Classifying low level employees as exempt for overtime purposes is all too common. There are lots of assistant “managers” out there making little more than $455 a week while working crazy hours. Increasing the legal threshold for exempt salaried employees will help people working these low pay, high hours jobs and potentially help decrease unemployment. The best part is there is no need to worry about dealing with a hostile congress.