Wednesday, March 12, 2014

President Seeks to Change Rules For Paying Overtime

It greeted me in my inbox this morning: "Obama Will Seek Broad Expansion of Overtime Pay." In a nutshell, the President says that corporations are making too much money, often at the expense of salaried workers who should be classified as non-exempt under the Fair Labor Standards Act (FLSA).

What do you think?

For background, as I am certain that most readers know, non-exempt workers generally must receive overtime pay (usually time and a half) for hours worked in a week beyond 40. The law gives the President/Administration fairly broad powers in classifying as non-exempt versus exempt. Currently, the regulations provide that workers typically earning $455 per week or more generally may be classified as exempt. The threshold was increased to that level by President Bush (43) in 2004 and has not been increased since.

Also classified currently as exempt under the label of professional or executive workers are groups including fast-food managers, computer technicians, loan officers, and other similar jobs that the President views should be paid overtime when they work beyond 40 hours in a week. The US Chamber of Commerce, of course, disagrees.

While I am usually pretty fiscally conservative, if I think about this, $455 per week isn't much. It's barely above the proposal from the Administration for an increase in the minimum wage ($404 for a 40-hour work week). On the other side of my brain, I consider that since I entered the professional workplace during the Reagan Administration, it has seemed fairly normal that people who want to get ahead in business will work at least 50 hours per week or more and in many cases, far more than that. It just became a way of life.

I recall that fairly late in the Clinton Administration when his Labor Department revised guidance on this issue that the firm that I was working for at the time reclassified who was exempt. That firm then turned around and said that non-exempt employees could only work overtime with approval from pretty high up managers. So, who won? Nobody, really. The company passed that work on to exempt employees and the newly non-exempt group who had seen pay raises cut in response to this regulation were stuck at 40 hours per week.

Lose lose.

Part of me wants to say that giving aspiring professional non-exempt workers the right to forgo overtime when they work more than 40 hours per week would enable those that want to get ahead to do so, but that would just take us back to the mentality in which I grew up in the workplace where we all worked insane hours to be the one person who stood out (of course we didn't because we were all that way) from the crowd and got ahead.

Ultimately, it feels like it is just part of macroeconomics. You can't just look at one individual and one company in a vacuum and see how they will react. There is a larger dynamic. If companies have to pay an individual overtime, they will seek to find ways around the rules to ensure that they can find exempt workers to do that job and still not have to pay. The newly non-exempt worker will lose and ultimately the company will lose as well. On the other hand, the Bush Administration limits probably exempt far too many workers from the rules. Nobody wins there either.

It's part of a broader give and take. In an ideal world, companies would allow workers to do their jobs and would pay overtime to those who should be non-exempt under the spirit of the FLSA. Also, in an ideal world, workers would not be working overtime unless it was truly necessary.

I wonder when we will be in an ideal world? Anyone? Buehler?

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