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October 1, 2015

Overtime: A fair day’s pay for an extra hard day’s work


The 40-hour workweek and time-and-a-half for overtime work are cornerstones of a strong and fair economy, and it’s time for the government to make these worker protections even better.

Overtime pay dates back to the Fair Labor Standards Act of 1938, the same law that established the federal minimum wage. But like the minimum wage, overtime protections have failed for decades to keep pace with inflation and rising worker productivity. That’s a problem for our economy because a strong, overtime system raises incomes for those who are being asked to work longer hours and spreads extra work to others, while a poorly structured one allows employers to overwork unprotected employees without paying them extra and avoid hiring more workers.

Fortunately, many hard working Virginians will soon regain well-deserved overtime protections. In July, the United States Department of Labor proposed common sense changes to overtime protections for salaried workers that will increase incomes for millions across the nation, broaden employment opportunities, and protect future workers.

Employers are generally required to pay employees at least 1.5 times their regular rate for each hour of work beyond the 40-hour work week. But under the current rules, salaried employees earning more than $455 per week ($23,600 annually) can be excluded if their work is deemed executive, administrative, or professional. For some executives and managers this exemption makes sense. C-suite executives likes CEO’s and COO’s are expected work long hours, and they’re compensated exceptionally well for their efforts. But their experience is far from normal.   

Today a salaried assistant manager at a convenience store making $23,700 per year and spending most of the 50 or 60-hour workweek running the cash register and sweeping floors like other employees isn’t given overtime pay and won’t see an extra penny. For too many, failure to pay overtime means their annual salaries fall well below what’s livable and sometimes even below the hourly minimum wage.

The Department of Labor’s proposal would raise the threshold at which employers must pay overtime to $970 per week ($50,440 annually) and make sure it rises with inflation by indexing it to the 40th percentile of weekly wages of full-time workers. This would increase Virginia’s share of salaried workers with overtime protections from 8 percent to 31 percent.

Research by the Economic Policy Institute estimates that those who will benefit most from these changes are female, African American and Hispanic workers, workers under the age of 35, and workers with lower levels of education. The changes will also most help people who work in office and support occupations, transportation and material moving occupations, and construction and extraction occupations. Furthermore, because it is pegged to the wages of middle-income workers, the threshold would keep pace with rising weekly wages, meaning it won’t have to be regularly updated.

There is no timeline for when the final changes will be announced or when they will take effect, but the 60-day comment period ended September 4th. The changes were suggested by President Obama in March, and they don’t require any Congressional action.

Overtime work is a sign of a strengthening economy, and it’s good when companies ask employees to put in extra time. But a fair day’s work demands a fair day’s pay. That was true in 1938, and should still be true today.  

–Aaron Williams, Research Assistant

Image: Working Overtime; J.H. Productions CC-BY-ND 3.0

The Commonwealth Institute

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