Everyone agrees that the current overtime threshold needs to be updated. The issue is, how quickly should this update take effect?
In May, the Department of Labor announced that they would be lifting the salary threshold for overtime from just over $23,660 a year to $47,476. This means that if you are a salaried employee who makes less than $47,476 dollars you will now be entitle to overtime (time and 1/2) for every hour worked in a week above 40.
“New overtime protections mark a major victory for working people that will improve the lives of millions of families across America,” said Richard Trumka, President of the AFL-CIO in a May press release. “We applaud the Obama Administration heeding the call for action to ensure working people get paid for all the hours we work. Taking this step to restore overtime is one of the many ways we are beginning to change the rules of our economy that are rigged in favor of Wall Street.”
“The fight for even stronger overtime protections and to raise wages for all working people continues. But today, millions of workers will receive a long overdue raise, healthier and more productive jobs, and more time to spend with our community and loved ones,” added Trumka.
Congressman Kurt Schrader
This week, Congressman Kurt Schrader (OR-5), Congressman Jim Cooper (TN-5), Congressman Henry Cuellar (TX-28) and Congressman Collin Peterson (MN-7) introduced legislation that will “initiate a reasonable three-year phase-in of the Department of Labor’s new overtime rule.”
“The current overtime threshold is horribly outdated and needs to be raised as both employees and employers navigate our changing economy. This bill will do exactly that without disrupting the way businesses operate and employees are paid,” said Congressman Schrader. “Since the DOL’s immediate phase-in date was announced, we’ve heard from business owners and their employees who are worried about implementing this increase overnight. Without sufficient time to plan for the increase, cuts and demotions will become inevitable, and workers will actually end up making less than they made before. It’s long past time we strengthen overtime pay protections for American workers in a meaningful and effective way.”
“While I believe the time has come to increase the overtime threshold, the DOL rule would put businesses in a bind and potentially lead to job loss,” said Congressman Peterson. “Both businesses and constituents in my district have expressed concern about the impact of an immediate threshold increase. A three-year phase in will provide adequate time for business to adapt to the new standard while also ensuring workers are fairly compensated.”
Surprise, businesses do not want to have to pay workers more money. How are businesses going to win the race to the bottom if President Obama and the DOL keep raising the floor?
The Schrader plan is to phase the overtime threshold in slowly to decrease the impact on businesses. Schrader’s office explained this proposed legislation would work in their most recent press release.
“On December 1, 2016, the Overtime Reform and Enhancement Act will immediately increase the threshold more than 50% to $35,984. Each year following, the salary threshold will be raised by $74 per week until December 1, 2019, when we reach the DOL’s proposed $47,476 threshold.”
The one thing that Schrader’s office neglected to mention is that the newly proposed legislation would also eliminate the automatic increases to the overtime threshold every three years.
The AFL-CIO quickly spoke out against this newly proposed legislation in a stern letter to all Representatives in the U.S. House.
July 14, 2016
I am writing on behalf of the AFL-CIO to urge you to oppose legislation, introduced by Rep. Kurt Schrader, that would rob millions of workers of the overtime pay protection they have earned. The misnamed “Overtime Reform and Enhancement Act” would delay by three years the full implementation of the Labor Department’s new overtime regulations, originally scheduled to take effect in December, 2016.
The Schrader bill would also eliminate the final rule’s mechanism that would automatically update the salary threshold every three years after implementation. As you know, workers have waited decades for an update to the salary threshold—it has only been updated once since the 1970s—in 2004 (when it was set too low). Having experienced decades of wage stagnation and uncompensated overtime, workers should not have to wait three more years for the protection the new regulations will provide.
The current salary threshold for overtime pay would be over $57,000 if it had kept pace with inflation since 1975. Instead, effective December 1, 2016, the salary threshold below which salaried employees are automatically eligible for overtime pay will rise from $23,660 ($455 per week) to $47,476 ($913 per week). The Labor Department based this new threshold level on the 40th-percentile salary for workers in the lowest-wage Census region (currently the South). Because history demonstrates that it can take years for the regulatory process to adapt to changing labor markets, the rule also indexes the threshold to inflation. Once implemented, the threshold level will increase every three years, beginning in 2020.
For approximately 12.5 million workers, this new regulation is the most effective way to raise wages, create jobs, and restore the 40-hour work week. The AFL-CIO urges you to oppose the Overtime Reform and Enhancement Act and any legislation that would delay or weaken implementation of this important rule.
William Samuel, Director
Phasing in the new overtime rule by $74 dollars a week may be good for some businesses but it is definitely not good for workers. This proposed legislation would create confusion as to when workers would qualify for overtime leaving workers wide open for wage theft.
Aside from ensuring that workers are paid fairly for the hard work they are doing, this new overtime rule is intended to stimulate job growth. Rep. Schrader is worried about potential job losses from the new rule taking effect, yet the only businesses who would be effected by this rule have workers making less than $47,000 a year salary, who work more than 40 hours a week. This means that businesses will have to choose:
- Do they want to continue to pay their employee a low salary and pay them overtime for every hour above 40?
- Do they want to raise the employee’s salary to $47,476, allowing the employee to work unlimited hours without having to pay them overtime?
- Do they want to continue to pay their employee a low salary and then hire an additional employee to complete the extra work that needs to be done?
Either way workers are going to get a benefit. Either workers will get more money in their paycheck or more workers will receive paychecks.
This proposed legislation is bad for workers and will only continue the stagnation of our economy while leaving workers vulnerable to wage theft by their employers. This legislation will do more harm than good and should be rejected.
For more information on who will benefit from the new overtime rule read our previous post from May 2016 or check out this handy info-graphic on the DOL overtime changes.