Copyright Capital & Main
Thanks to Donald Trump, a doubling of the overtime salary threshold for salaried employees will likely never happen.
In March of 2014, President Obama announced that he had directed the Department of Labor to update what is called the overtime salary threshold for white collar workers. This refers to the salary at which a worker no longer needs to be paid overtime for a workweek in excess of 40 hours. In 2014, it stood at just $23,660; two years later, when the new rule was published, it doubled the salary threshold to $47,476. “Overtime is a pretty simple idea,” Obama said, speaking to a group of business executives and workers who had gathered in the White House’s East Room. “If you have to work more, you should get paid more.”
At the time, the government estimated that 4.2 million new workers would be eligible for overtime. The left-leaning Economic Policy Institute (EPI) put the number at 12.5 million, citing loopholes that Obama’s new rule would close. Either way, it was a massive expansion of overtime benefits, a rare piece of positive news for workers in an era of attacks on organized labor and stagnating wages.
Thanks to Donald Trump, that expansion will likely never happen. Last November, just before the rule was to take effect, a district court judge in Texas issued a preliminary injunction against the government, siding with a coalition of employer groups and states that had sued the Labor Department. The Trump administration has signaled that it will not defend the expansion, and last week the Labor Department requested additional comments on the rule, typically a prelude for revoking or revising an order.
Nick Hanauer, venture capitalist: “Expanding overtime is the equivalent of the Fight for 15 campaign for the middle class.”
The Obama administration’s proposed rule change would have been its most far-reaching policy to boost the earnings of low- and middle-income workers. It would have removed the one big, traditional exception to the overtime rule by including previously ineligible “EAP employees” – salaried workers who are classified as executive, administrative and professional. The presumption is that they already earn decent salaries. The truth is that millions of these “white collar” workers earn poverty-level wages. Think of the assistant manager at a fast food chain, or the shift supervisor at Walmart, putting in 60 to 70 hour weeks. They work more, but they don’t get paid more.
“Expanding overtime is the equivalent of the Fight for 15 campaign for the middle class,” says Nick Hanauer, a venture capitalist and entrepreneur who has spoken out about the risks of rising inequality. “It really is the indispensable labor standard for the middle class.”
Of special importance to low- and middle income employees was the fact that the Obama threshold would have also been tied to inflation.
“If the rule had been implemented, it would have made a huge difference in the lives of millions and millions of middle-class families,” Hanauer told me. These families are the very same people Trump paid homage to in his inaugural address when he cited “the forgotten men and women of our country” who, he promised, “will be forgotten no longer.” And they certainly include the working men and women of Florida, Pennsylvania and Ohio, three states whose voters tipped the election to Trump. In Florida, 1.1 million workers would have benefited from the overtime expansion. Nearly half a million workers would have benefited in Pennsylvania. Another 351,000 in Ohio. It turns out that they will be forgotten for a while longer.
There was a time when most salaried workers in the U.S. had the right to overtime. Back in 1975, the overtime threshold set by President Gerald Ford was the equivalent of $58,000 in today’s dollars. That covered 62 percent of the salaried workforce. Under the Obama expansion, the number covered would have reached 34 percent. The current threshold of $23,660 covers just seven percent of the salaried workforce, meaning that overtime has nearly been banished for folks who work in the office. Under Trump, that may very well happen: The Labor Department recently stated that it is thinking about eliminating the overtime salary threshold altogether.
The notion of rolling back the salary threshold alarms Celine McNicholas, the EPI’s labor counsel. “The threshold was already appallingly low,” she says. McNicholas notes that some employers had adjusted their overtime policies early to conform with the Obama rule, which had already economically benefited thousands of workers. “Any effort by the Trump administration to weaken or rescind the rule,” she adds, “would take money out of workers’ pockets.”