Proposed New Overtime Rule: More Time or More Money?

LR-Calculator_iPadFor the past year, the U.S. Department of Labor has been working on new federal overtime regulations, which Jon Orleans reported in this blog last March [March 14, 2014, Revamping Overtime Regulations: No Specifics Yet] The Department of Labor has now submitted a proposed overtime rule update to the Office of Management and Budget for review.

Once the OMB process is complete, the specifics of the proposed rule will appear in the Federal Register for public comment. However, a DOL press release discloses that the earnings  threshold for exemption from overtime requirements will more than double from the present $455 per week to $969.  In effect, all employees with annual pay of less than $50,388 will have to be classified as hourly employees, eligible for overtime pay.

Overtime, of course, means payment at one and one-half times the regular pay rate for all work in excess of 40 hours in a workweek.  The new rules would add millions of more workers to the ranks of those who must be paid overtime, and thus would increase their annual earnings. The government has emphasized this increase in earnings as the prime motivation for an overhaul of the overtime rules, which were last revised in 2004, and before that, not since 1975!

But money was not the only motive for the inclusion of the concept of overtime pay in the Fair Labor Standards Act of 1938, the first legislation to regulate hours and wages of workers nationally.  Rather, the Act was in part a response to the “eight-hour day” movement, also known as the “short-time movement,” which arose in the nineteenth century to address the ten-hour (or more) work days which were common at the time.  The idea was that the overtime requirement would discourage employers from requiring work beyond a standard 40-hour week, or encourage them to parcel the work out among a larger group of employees, thus leaving individual workers with more free time.  The goal was less time at work, and more money only if extra work was unavoidable.

Now however, the stated goal of the proposed regulations emphasizes  increased earnings rather than decreased work time.  Along with issues such as a higher minimum wage and income inequality, the new rules are designed to address the perception of stagnant wages that have reduced the purchasing power of the middle class, and workers in general.  The Congress has the ability to override Department of Labor regulations, and could try to block or modify the new regulations. But the difficulty in opposing regulatory changes that would increase the incomes of so many voters as an election year approaches may be one reason why the DOL has taken so long to develop its proposal.