Opportunity for All: Fixing Overtime Rules to Reward Hard Work

by Secretary Tom Perez on March 13, 2014 · 28 comments

You would probably assume that people with titles like “manager” or “supervisor” are well-compensated for their efforts. After all, they’ve probably worked hard to earn that title, putting in long hours, perhaps obtaining more education or training to get a promotion.

But all too often, these salaried employees are earning less per hour than the employees they supervise. Consider the two New Jersey gas station managers encountered by the Labor Department’s Wage and Hour Division. Despite typically working 65 hours per week (say 7am to 8pm every weekday), their salary was so low that they weren’t even making the equivalent of the minimum wage.

As part of his vision of opportunity for all, President Obama is committed to making sure hard work is rewarded with fair wages. That’s why he signed a Presidential Memorandum today, directing me and the department to fix this problem by updating the regulations regarding who qualifies for overtime protection.

The Fair Labor Standards Act establishes wage protections, including the right both to the minimum wage and time and a half overtime pay for more than 40 hours of work per week, that are intended to apply to most workers. The law provides for some exceptions, but the exceptions haven’t kept up with our modern economy. These exceptions were originally designed to only apply to well-compensated employees with greater job security, more bargaining power, and higher potential for promotion. So as long as these professionals earned above a certain salary threshold, they were not entitled to overtime.

Unfortunately, that salary threshold has only been updated twice in the last 40 years, so the exception is capturing employees who just don’t make that much. That includes the New Jersey gas station managers, as well as retail, fast food and janitorial workers across the country. The current salary threshold is only $455 — below today’s poverty line for a worker supporting a family of four.  So under the current rules, even if you’re poor, you may not qualify for overtime. That doesn’t make sense.

So I was proud to stand with the President at the White House today as he announced this action to build lasting economic security for the middle class and those aspiring to join it.

By updating who qualifies for overtime pay, we are expanding opportunity and making sure hard work pays. Today’s announcement will give millions more people a fair shot at getting ahead, a better chance of realizing their dreams.

Follow Secretary Perez on Twitter as @LaborSec

{ 28 comments… read them below or add one }

1 AVeteranWorker March 14, 2014 at 1:50 am

how long before you make these changes?

Can you create dynamic minimum wages that are based upon each state’s minimum requirements rather than lumping all the states into a single minimum? It costs more to live in California than it does to live in Mississippi.

And will you please factor in some time for us to to live and enjoy time with our families?

I am a “Salaried Exempt” computer programmer with a salary of $55K/year.
Why is it that an “exempt” worker be made to work 18 hour days for not one cent more than their “Exempt Salary”? What I am really asking is why don’t exempt employees get paid for hours past 40 worked in a week? My company classifies everyone as exempt salaried and makes us all work 12-18 hour days 7 days a week for that salary, and we never receive another cent beyond our salaries while the owner makes millions in profits. How is this the American Dream when we are not allowed time to enjoy our own personal lives?

We are slaves living in fear: if we complain we will be fired and new employees will take our places.

Thank you, and good luck.

2 Mark Wilson March 14, 2014 at 7:52 am

Although we strongly agree with President Obama that the regulations implementing the FLSA should be revised to “address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply,” we are disappointed that your blog does not mention this part of the memorandum or the problems employers and employees confront in dealing with the inflexibilities in the current regulations.

A major challenge in ensuring compliance is that the FLSA was enacted during the Great Depression and is designed to address the workplace of that era and the decades immediately following, not that of the technology driven world and workplace of the 21st Century in which employees live and work. The law was passed when there generally was a fixed beginning and end to most employees’ workdays, with none of the advances in communications technology that have created the virtual workplace, giving employees flexibility by allowing more and more work to be performed from remote locations. Moreover, when the exemptions were being defined, there was a far more stratified and predictable designation of occupations, as compared to today’s workplaces where there is a greater blurring of distinctions and a more rapid evolution of job descriptions.

These changes have created a deep-seated tension for employers seeking to comply with the law. On the one hand, the requirement that non-exempt employees be compensated for “hours worked”—and that those hours be meticulously monitored and recorded by the employer—have forced employers to impose restrictions on scheduling and work performed remotely, including banning the use of PDAs where time cannot be tracked. These forced restrictions are contrary to the goals of a more flexible workplace that are desired by employees, employers, and the administration. On the other hand, the alternative for avoiding these restrictions—salaried exempt status, which is preferred by many of today’s employees—is constricted by a substantial lack of certainty under the current regulations and the actions by plaintiffs’ lawyers seeking to exploit those uncertainties through litigation.

We are very concerned the Department may proceed with the President’s directive on the assumption that the only aspect of the FLSA to be addressed is the constriction of exemptions so that more employees can earn overtime and that all of the targeted employees prefer hourly rather than salaried status. For one thing, being classified as a nonexempt employee doesn’t necessarily mean the employee receives higher compensation. To remain competitive in recruiting and retaining employees, the employer, in setting a salary for an exempt employee, will take into consideration the fact that the work may involve hours extending beyond 40 hours per week. Thus, the employee may actually receive less by being paid an hourly wage, subject to fluctuating amounts of available overtime work.

Most importantly, we are concerned about a piecemeal approach to changing the regulations without addressing the myriad other problems that need to be addressed. For example. if there is a threshold above which employees must be paid in order to be exempt, should there also be a salary ceiling above which any employee would be exempt? In recent years, numerous lawsuits have been filed by highly compensated employees–sometimes making six-figure salaries–even though they clearly do not fall within the scope of the statute’s intended protections.

In addition, should the number of employees required to be paid on an hourly basis be expanded without first addressing the problems in tracking hours worked away from the workplace? Today’s workers often do not necessarily feel that they leave their responsibilities behind them when they leave the workplace–if they were even in a specific “workplace” to begin with. How does the employer track the occasional call to a co-worker or supervisor or checking of e-mails when it is being done in the off-hours? Employees themselves often don’t track these or, when they do, the employer must take their word for it. This challenge needs to be addressed before more employees are added to nonexempt status.

Thus, in the face of the disconnect between the law, the regulations, and today’s workplace, we strongly recommend that, instead of moving forward with simply increasing the salary level test under 29 CFR 541, the Department work closely with us and other stakeholders on all sides of the issue to explore ways to update the Fair Labor Standards Act to reflect the workplace reality of the 21st Century. We would very much like to meet with you to discuss our concerns and recommendations. We hope you agree and look forward to working with you in such an effort.

Mark Wilson
Vice President, Health and Employment Policy
Chief Economist
HR Policy Association

3 M. E. Steem March 14, 2014 at 8:34 am

Although most would agree that the $455 threshold is dated, your statement that exceptions were originally designed to apply to well-compensated employees with greater job security, more bargaining power…is inaccurate if not absurd. By virtue of being salaried, there has never been “greater job security” nor “more bargaining power” unless the salaried employee happened to also be an owner of the company. It is far easier to terminate, fire or lay-off salaried employees than hourly employees as has been demonstrated time and time again with mergers and acquisitions. Lastly, this brilliant strategy of increasing compensation (requiring premium pay for hours in excess of 40 for a larger number of salaried employees) will have one predictable outcome—increased unemployment. The United States is already at a competitive disadvantage in the international market-place, already causing very low paid hourly and salaried jobs to go overseas or south of the border. Raising wages or salaries will only increase the out-flow so one can only conclude that DOL and Mr. Obama are intent on increasing our competitive disadvantage and shipping more jobs elsewhere.

4 theresa zeigler March 14, 2014 at 9:18 am

This should apply to Teachers in “Right to Work” states where the average teacher works many days ‘on the clock’9 to 10 hr days with no breaks, then face another 2-3 hours to complete work at home since time ‘on the clock’ was not allotted for ‘extra’ things like lesson planning, grading tests and communicating with parents.

5 David P. Yeager March 14, 2014 at 9:30 am

That is AWSOME!

6 Angela vassall March 14, 2014 at 3:09 pm

I work in healthcare and worked 12hrs over time last week but when recieved my check today i was only paid my hourly salary for the overtime hours. I questioned payroll and they told me in healthcare overtim is calculated by minimum wage. I never heard of this. Please tell me if my employers mis-payed me. Thank you. -Angela

7 Brandon Nixon March 15, 2014 at 12:38 am

I’m Afraid I must ask M. E. Steem for a clarification on his/her statement that “requiring premium pay for hours in excess of 40 for a larger number of salaried employees will have one predictable outcome—increased unemployment” It seams to me the opposite would be true. If employers are required to pay a premium on hours over 40 it will become cheaper to hire more people each working 40 hours than to employee fewer people each working 50 or 60.

8 Patricia Sirowich March 16, 2014 at 1:59 pm

I have read the current comments and agree that the “workplace reality of the 21st century” has changed. We employ salaried exempt part time and full time employees along with hourly employees. Many of our staff require flexiblity in their schedule as well as in working remotely where we have to go by trust. Some of our staff travel in cars, trains and airports. It is not fair to have to pay overtime for work related travel where the employee is listening to the radio or reading a personal book . We offer 15 paid holidays, minimum 10 vacation days, quarterly and annual bonuses, along with flexibility for personal time off. If this new law passes, our company will take away the paid holidays, vacation and revisit bonuses and strictly monitor flexibility.

Also we have staff that are just not as organized, efficient and focused and REQUIRE extra time to finish their work. We would have to fire that person and find someone who COULD finish the job in 40 hours. Having worked for 45 years and ALWAYS worked more than I was expected to work with no extra pay I believe that it produces a different kind of worker, work ethic and mind set. The new young American today lacks that work ethic and in the competitive global environment we work in now, to see MORE jobs outsourced overseas to a worker with a different work ethic is very sad for the United States.

Unfortunately, knowing too much about PPACA makes me think that the REAL reason for this law is NOT to help people, but to help the government make more money. More money in the form of taxes on more money that people make, who will soon see that they are NOT making more as they thought because more taxes will be taken out. Also, this will mandate employers to require a documented system/technology to attest to the number of hours for ALL staff . This will allow more documented accountability that could be required by the government on the number of FULL time employees (more than 30 hours a week calculated throughout an entire year) which will require more fees to be paid by the employer as stated in Obamacare.

9 Pamela Gonzales March 16, 2014 at 8:48 pm

I work as a claims adjuster and have been working years without overtime to ” get the job done.” It is expected of you to put in the time to get your job done if you are salaried. It happened at 3 out of the 4 insurance companies for which have worked . If anyone asked management just shrugs their shoulders. Everyone knows if you want to “meet” expectations and keep your job, you gotta work.

10 Joe Bar March 17, 2014 at 10:31 am

This is what I see happening. Let’s say I have a business. I have an employee that works 60 hrs. I know have to pay them overtime. I think a little bit, and I will hire a new person to work the 20 hrs. part-time. Sure, that will give that first person more time with his family, painting pictures or learn how to skateboard, WHATEVER. Now I think, if I have each work 29 hrs., I can get out of paying for their health insurance too and still get close to 60 hrs. of work done per week. Thanks Obama! I can now blame you for cutting the hours of the first person. Welcome to the part-time America. Yet another socialist/progressive idea gone bad. Companies will have to find ways around your stupid ideas or they will go out of business. Then nobody has jobs. Brilliant! We can all be whiners with their hand out for free money the government steals from hard working people. By the way, Robin Hood took money (taxes) from the Sheriff(corrupt government) and gave it back to the people that worked and earned it.

11 Liz B March 17, 2014 at 12:50 pm

I think it’s fantastic to finally be addressing these issues! I personally work for an Auto Center where I am the manager. I earn 40K a year but am Required to work 50+ hours per week even though I have no real power and am also not sitting at a desk for more than 1 hour per day the balance of my work is on the floor and helping customers no better than the employees I am supposed to supervise. I am required to work 50+ hours, without lunch breaks, regardless of the shop needing our presence or not (it could be just business as usual and easily run without me and I am still required to be here), and without any consideration for my own personal time and without really getting personal time since I’m then on-call and have to accept calls from the shop at all hours. They do this so that I am actually making up for their lack of employees. They can’t or won’t allow us to hire enough workers as the manager is taking up the slack. People keep saying that this will decrease jobs, I don’t think it will. The companies will still have to have workers in order to run and there are a lot of employers who can’t send their jobs overseas especially in service and healthcare and it’s much too profitable to shut the doors. Don’t allow these employers to get away with working their so called manager into the dirt without compensation. They should never be allowed to require over 40 hours unless there is a direct, and imminent business need! Just forcing people to work more hours for the heck of it is ridiculous and wrong. I should be able to spend time away and with my family!

12 Melissa March 18, 2014 at 12:45 pm

Oh yes, put more regulations on businesses so they won’t even be able to afford to stay in business. Brilliant!

13 michael berg March 18, 2014 at 4:07 pm

a couple years ago there was discussion about redefing the work week as “any seven consecutive days.” employers have been cheating Americans for years by working wednesday to tuesday (seven 12 hour shifts in a row), while calculating payroll Sunday to Saturday. thereby saying employees worked 48 hours one week and 36 hours the other. Will this injustice be addressed any time soon?

14 Brian March 18, 2014 at 7:31 pm

My brother works in IT and another hospital system acquired his hospital. They interpret the FLSA as allowing them to cancel all overtime to IT employees even though my brother has received overtime for 17 years. Does this new memorandum fix that nonsense?

15 krista March 24, 2014 at 7:26 pm

I just learned of this “legislation” (in quotes because I thought that was the job of the “legislative” branch) from a friend who thought she was telling me good news. But learning this news a week after I realized my bonus structure changed to cut my earning potential in half . . . Not good news. But now I understand the sudden change. Quit messing with our lives you paternalistic government! I also work at a gas station, and until now I had the most control over my profits than anyone. Laissez faire. In other words, get out of my life!

16 Ron Bell March 29, 2014 at 1:40 pm

I am a truck driver, companies are using DOT regulations from a law passed in 1935 to get around paying any overtime. In 1935 there were no On Board Computers in trucks, now we are not only truck drivers but with the OBC’s we have become secretaries also. Our cab has become a cubicle, should we not get compensated for all the time we spend on duty ? Most of us are on duty at least 12 or more hours a day to earn what we should earn within an 8 hour period. I am earning less than I was 13 years ago because most of your trucking employers are not paying hourly for local drivers anymore because of a law passed in 1935. There is a 500 pound Gorilla sitting in the room but no one seems to want to address an honest days pay for an honest day of work, shame on America…

17 Jill March 31, 2014 at 2:49 pm

Secretary Perez,

I applaud your effort. A simplified, updated manner of determining exemption status should be greatly appreciated.

18 April April 10, 2014 at 12:20 pm

Diesel mechanics work very hard at keeping their trucks going. For the things America needs. They work 50+ hours a week, and because of a law that states if you work on a vehicle over 10,000 lbs you are not entitled to overtime. This should be changed.

19 Liz April 16, 2014 at 6:15 pm

I work for an employer who requires 10-12 hour weekdays and at least 6 on Saturday for at least 5 months out of the year. They list me as salaried non-exempt although I’m not managing anything. I just check to make sure things are correct and pass them along.

They “pay” us overtime at a sliding rate starting at half our regular hourly rate and decreasing the more hours you work. At 53 hours I’m making minimum wage and they require 56-66 hours a week.

They say they have lots of paperwork saying they are allowed to do this. If this is true and they aren’t breaking the law by doing this, would you find out what the loophole is and close it?

20 Reno Valverde April 21, 2014 at 7:01 pm

When can we expect these changes to take place? I am currently making about 35k and worked 60-80 hours every week. It’s killing me.

21 fed up city tractor trailer driver April 21, 2014 at 9:53 pm

i hope goverment hit them hard…especially the trucking company i work for that wants us to deliver allday and allnight with no overtime at all until you hit 55 hours…wtf….this is pure greed in my eyes i work hard to support my family i am not here just for the hell of it!

22 Roz April 22, 2014 at 7:18 pm

I manage 50 people and am a salaried exempt employee. I am paid for 40 hours a week but I work 8-10 hour days and also mandatory Saturdays for 5 or 6 hours. I also oversee quarterly inventories working 24-30 hours over the weekend, unpaid. I also work on public holidays although I don’t get a “free” day off as my employer “requires me to work for business need.” I get one day off a week. I do get a paid vacation of two weeks. It works out to about $13 an hour on the regular weeks and $12 an hour for inventory weeks which is what we pay our regular workers. They end up making a lot more money that I do for half the work as they get OT. Except for the paid vacation, I am not getting any benefits as my health insurance is through my husband. I need to know if my employer is violating any laws. I think for some employees (myself included), this overtime pay would be a good thing. For others it would not be as I can see how it could be taken advantage of very easily.

23 IHSS (Family) Worker : 24-hour Protective Supervision May 2, 2014 at 1:06 pm

I will lose > 1/3 of my income because of this legislation. Because I am a SINGLE PARENT, I will lose 100 hours out of 260 eligible hours each month because the GOVernment Will Not Pay in excess of 40 hours per week. A two-adult household could split the 260 entitled hours/month, but I cannot – despite the fact that my child qualifies for these hours and I will be working those hours (and then some). I will just not be paid and cannot get another job to make up the lost wages. “24-hour Protective Supervision” is not covered by any exemption to the Overtime requirement. This is a gross miscarriage of justice and common sense.

24 vicky July 3, 2014 at 5:56 pm

It will be a good practice to pay supervisors and managers some extra overtime time money beside their regular fixed salary, as they work more than 40 hours a week and are responsible for the growth and improvement of the business. They are the ones who come early in the morning and stay late in the evening because they have the responsibilities towards the work. Most of the employers take advantage of this and take their supervisors and managers for granted while there business is growing and they pocket all the money. Its time thing need to be changed and employers need to reward and appreciate financially there hard working supervisors and managers. If you calculate end of the day supervisors and managers get paid less than the regular hourly employee who is less productive

25 White Collar = Screwed July 10, 2014 at 10:51 pm

I am the only “local” IT person for over 10 counties for a department in a mid-western State Government. My primary job duties are to support employes in the region for every piece of electronic office equipment. No programming, unless you count entering an IP Address or resetting a password as programming. I do not manage anyone, I can suggest items to purchase but those decisions are made in the state capital not in the field. Because I “consult” with employees (help them decide if they should ask for a desktop or laptop) I am considered exempt. The pay is low but reasonable if you only work 40 hours a week. Going above and beyond happens more and more often and we get comp time of 1/2 of an hour for every hour over 40 we work. Granted it’s better than nothing but it is so nice that the unpredictable time away from my family and the second job required to pay bills is only half as valueable as the first 40. And there is no option to get money for that time so you could quit the second job and good luck getting approval to use that 1/2 comp time before it expires. So what is the difference between me fixing a computer or a construction worker fixing a crack in a wall or mechanic replacing an engine computer? Other than I get more air conditioning and less dirt/grease on me I don’t really see it. Why do all IT employees get screwed as a special class of worker? I have not seen a raise in over 10 years, 1 or 2% is meaningless, we are not “highly paid” and the threat of outsourcing is always brought up if you open your mouth and complain about anything.

I’m not even asking for time and a half (it would be awesome) at the very least give me back 1=1 for EVERY hour I work. Don’t let employers expire comptime or better yet force comptime to be used the following week to stop employers from working us to death! Let the employee choose to receive money to pay the mountain of bills or time to spend with family.

26 Anna Mouse July 20, 2014 at 3:15 pm

I have NEVER worked a 40 hour workweek. Usually the workweeks are from 60 to 100 hours a week and I know many others who work similar hours.

When I speak with my co-workers they drive me nuts by refusing to admit they work long hours. They typically don’t include hours they are working from home, sending emails, creating reports, and so on.

Adding insult to injury companies do not reward hard work and will reward your dedication with a pink slip.

27 Brigitte August 9, 2014 at 12:33 pm

That is really good, but it does not fix an even bigger problem! The overtime law is based on a work week. Say your work week is from Monday to Sunday , now you are working Monday and got Tuesday off and work again Tuesday Wednesday Thursday Friday Saturday Sunday Monday Tuesday and Wednesday and get Thursday off and work Friday and Saturday and get Sunday off. You would not work more than 40 hours the workweek but since you work 8 days strait in. A 2 week period you would work around 60-70 hours strait with no overtime pay ! When does that get fixed?

28 Heath Hall August 18, 2014 at 8:17 pm

Thank you Secretary Perez, and good luck with your unenviable task of forcing American corporations to treat employees fairly. Skirting fair wage laws is not only the tool of the service industry, but also our largest white collar employers. Under the current provisions for every four low-level exempt employees it requires to put in 10 unpaid overtime hours each per week, a corporation in this time of record profits doesn’t have to hire that fifth employee. It’s as simple as that and not lost on corporate leaders, who are receiving record compensation of their own.

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