Wednesday, June 8, 2016

The New Overtime Rules and the Deceptive Response

The New Overtime Rules and the Deceptive Response

New overtime rules for the Federal Labor Standards Act (FLSA) will begin December 1 of this year. Current overtime rules only apply to someone paid a salary equal to or less than $23,660 a year or to someone paid an hourly wage, a decision entirely at the discretion of the employer. FLSA rules calls for pay at a rate of time and a half for hours over forty hours a week. Over time pay gives employers the incentive to hire additional people rather than pay overtime; two people working sixty hours a week equals three people working forty hours a week.

The current overtime pay exemptions date from August 23, 2004 following a substantial revision of Fair Labor Standards regulations by the Bush Administration. The revision added lots of new language that made it easier to exempt executive, administrative and professional employees from overtime pay as long as they work for a salary above $23,660.

The new rules are sometimes called white-collar rules because exemptions to overtime pay have never applied to “manual laborers or other ‘blue collar’ workers who perform work involving repetitive operations with their hands, physical skill and energy.” For example, with the current white collar rules an employee can be denied overtime pay if employed in a bona fide executive, administrative or professional capacity and compensated by salary at a rate of not less than $455 per week ($23,660 a year) exclusive of board, lodging or other facilities, whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

On December 1 the minimum annual salary requirement for overtime pay goes up to $47,476, but does not change the regulations like the one paraphrased above. The new minimum is high enough that some employees previously exempted from - denied - the right to overtime pay will be entitled to it.


Business owners, managers and those who identify with business owners and managers will not like the change. It will raise wage costs and lower profits; the changes redistribute income to wage earners at the expense of individual business profits. The people who do not like the policy do not generally mention how much easier it was to avoid paying overtime after the Bush administration revisions of 2004, or how stagnant wages reduce buying power and limit economic growth.

The Department of Labor estimates the new rules will apply to 4.2 million people and if overtime pay raises buying power enough to increase total spending, more production and sales will increase collective business profits. In that way the rules might improve the economy for the larger society but individual businesses will have higher net profits if they can get essential work done by avoiding over time pay.

Opposition comments published in the newspapers (Washington Post, May 21, 2016, “The potential pitfalls of new overtime rule”) and the Internet avoid confronting the redistribution issue or the abuses so common to overtime. The Washington Post article cites the ominous proviso offered by unnamed business groups that “ what workers will probably see a lot less of is flexibility on the job.” … “As an employer, you will have to think about how much time did the person really work … It’s a headache and because it’s a headache, the employer’s first reaction is going to be: ‘No, you can’t work from home. Sorry.’ ”

Beware the deception. Compliance with the FLSA already requires tracking hours worked, whether they are at an office or work from a remote computer. The first sentence of the Fair Labor Standards Act requires that all hours of work will be compensated. Executive, administrative and professional occupations are exempt from overtime pay, but they are entitled to regular pay for work over forty hours a week. Flexibility for salaried people should not turn overtime hours into free work. People who get pressured into working fifty and sixty hours a week who get paid a full time salary based on legally designated full time workweek of forty hours giveaway overtime hours for free.

The Washington Post article cites a lawyer who suggests “some employers may choose to bump workers above the salary threshold, avoiding the problem entirely. But many employees will probably be “re-classified” as hourly workers at which time the number of hours they work might be limited or carefully monitored and tracked.” That translates to some employees can expect reprisals to convince them the new rules are bad for them, as well as business.

These new rules offer modest help to a modest share of working people living on their wages. It is a conservative change, albeit in the right direction, to reduce income inequality. It highlights class conflicts between working people and business owners. Business fights every effort to improve wages as they have here even to the point where low wages are so low they drag down the economy and reduce economic growth. These are new rules, but it’s an old battle.

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