The Fair Labor Standards Act (FLSA) of 1938 established some of the New Deal’s most important protections for workers. It gave us the 40-hour work week and mandated that working people be paid overtime — at least time and a half — for putting in more than 40 hours a week. Today, FLSA covers about 75 million Americans.
The rationale behind the legislation was that most hourly wage-earners don’t have a lot of bargaining power with their bosses. But it was also assumed that management and skilled professionals did have the clout necessary to protect themselves from being exploited, so the act exempted those groups. But exactly who is or is not exempt from the overtime requirement has been a point of contention ever since.
There are various tests built into federal labor law to determine who’s covered by the law according to their professional responsibilities. But those standards can be complicated and difficult to enforce. Then there’s a simple cutoff — regardless of what you do for a living and what your exact responsibilities are, if you’re a salaried employee making less than $455 per week (or $23,660 for someone who works year-round), then you’re automatically covered.
The problem is that this cutoff isn’t tied to the cost of living, and since 1975 it has only been increased once. That was in 2004, when a person making just $5.15 per hour could be considered a manager or skilled professional. (And, as economists Ross Eisenbrey and Jared Bernstein pointed out in a paper released by the Economic Policy Institute (EPI) in March, that one adjustment, under George W. Bush, included other changes that “led to more confusion and ambiguity, and, even worse, to the unjustified exemption of salaried workers who, under the spirit of the law, should be covered.”)
If the $455 cutoff had kept pace with inflation since 1975, it would now be $984 per week — more than twice what it is today.
Last year, Eisenbrey and Bernstein called on Barack Obama to use his executive authority to raise the threshold to the 1975 level of $984 per week. Stymied by Congress, Obama vowed to use his “pen and phone” to do what he could for working people without going through the legislature. Since then, Obama has issued executive orders mandating that (most) federal contractors pay their workers at least $10.10 per hour, prohibiting contractors from retaliating against workers who discuss their salaries with their colleagues — and compelling them to release information about how much they pay workers according to sex and race. He recently signed additional orders barring contractors from discriminating on the basis of sexual preference and preventing contractors from forcing their workers into arbitration, rather than seeking remedy for workplace abuses in the courts.
Because it’s up to the Department of Labor to determine these rules, the cutoff for workers to be guaranteed overtime protections can be increased with a stroke of Obama’s pen — and for all workers, not just those employed by federal contractors. In March, the Obama administration announced that it intended to do just that, along with enacting additional rules that would make it harder for businesses to misclassify employees as managers. At the time, the top job at the Labor Department’s Wage and Hour Division, which sets the rules, had been vacant for some time. But in June, David Weil was miraculously confirmed to lead the division by the Senate, and he has since shown every inclination to do what he can to protect vulnerable workers.
On Wednesday, EPI’s Heidi Schierholz published a paper analyzing who would benefit from this proposed order. She found that, broadly speaking, “women, blacks, Hispanics, workers under age 35, and workers with lower levels of education are at the low end of the salary scale for managerial and professional workers and would therefore disproportionately benefit from an increase in the salary threshold.” Of the 21.7 million wage-earners who are currently exempt as managers, Schierholz concludes that 6.1 million would be automatically covered by the FLSA if the cutoff were raised to $984 per week.
Like Obama’s other executive actions, this proposal wouldn’t be a magic bullet for what ails our increasingly lopsided economy. But with a Congress that’s so polarized it barely can maintain the most basic functions of government, these small efforts at least represent a step in the right direction.