Everybody is talking about the overtime law passed in August of this year. Under the previous overtime standards, any salaried employee whose gross income is $455 a week or more is not eligible for overtime, regardless of the number of hours worked. Even in 2004 when the overtime exemption threshold was last set, that was pretty low. Admittedly it was better than the previous cap of $155 a week. Really. The cap for the overtime exemption ought to adjust on its own and be tied to inflation. If not that, there should be a mandate stating the next time the number should come up for review—at least every five years. But that would make far too much sense, right?
What does the new overtime threshold mean? An employee is supposed to earn one-and-a-half times their regular pay for every hour over 40 they work each week. But there is an exemption for those who are “management” and earn over $455 a week. Of course management can mean anything from a cushy office gig to a fast food McWorker in a different colored hat than non-management. The new overtime legislation, taking affect in 2016, means salaried workers must earn $970 a week before they lose their opportunity to earn overtime for the extra hours they put in. It also means roughly 32 percent of the workforce will now be eligible for overtime pay when they weren’t before. That’s great news for women, minorities, and those without any higher education. These groups tend to work more low paying jobs while providing for children and other family members.
More overtime pay is obviously great for employees, right? Some say no. It’s been suggested employers may lower base pay of employees to offset paying them for overtime work. But could employers get away with such an astonishingly dickish move? Let’s hope not. It’s more likely an employer would raise a salaried employees base rate to avoid the white collar exemption set by the new overtime law. With the raised threshold though, $970 a week is not a bad wage—depending on how many hours they’re working each week.
Long before the update in overtime wage laws, Big Business was scrambling to negatively portray the push toward fairer compensation. In 2014 Washington Insider, for example, ran the headline: “White House Plans to Force Businesses to Pay More Overtime.” Note the incendiary language like “forced.” Apparently whenever there’s a law passed, we’re all “forced” to follow it. Every one of us is “forced” not to murder anyone, each and every day. That’s how laws work, right? Sounds silly, but whinypants businesses just can’t let go of the idea paying employees for the work they do is totally unfair…to the company. Our President disagrees. In his op-ed for Huffington Post, President Obama pushed for the change in overtime law saying, “Right now, too many Americans are working long days for less pay than they deserve.”
More overtime pay, like higher wages in general, tends to benefit businesses as well as employees. It’s well established that when the middle and lower economic classes have more money, they spend it. Higher wages triggers more spending overall. This means businesses are busier and making more profits, allowing them to pay the extra wages without issue. Higher wages has been shown to impact spending on big ticket items like homes and cars. That can help struggling cities like Detroit. All things considered, the new overtime law is a big step forward in the fight for living wages.