New Overtime Rules a Boon for Middle-Class Workers

1030minwage01
Tammy Jenkins, an assistant store manager at Walgreens, updates price tags at one of the company's stores in Louisville, Kentucky, on September 30, 2013. Walgreen was sued in 2015 by employees who argued they were promoted to manager merely to save the company money. The case was settled out of court. Luke Sharrett/Bloomberg/Getty

Melissa Agnello earned her Ph.D in microbiology last year from the University of California at Los Angeles, an impressive achievement that unlocked her ability to wave goodbye to a decade of student poverty and... be a little less poor. She’s doing post-doctoral research now at the school, studying the microbiome, the bacteria that live on the human body. The job pays $42,800 a year, which would be a king’s ransom in rural Arkansas but in southern California it means a 45-minute commute to work from the place she and her husband can afford to live. It’s also a position that pays no overtime, even though Agnello doesn’t really have any duties that might be considered managerial, exempting her from overtime law. When she works 60 hours in a week, she makes the same amount of money as when she worked 40.

Plenty of American workers and plenty of international workers have it worse. But things are looking up for Agnello and an estimated 12.5 million workers across the country in the wake of an Obama administration change to the Fair Labor Standards Act announced last week, raising the salary threshold for overtime pay. By the first of the year, Agnello will either see her pay jump to $47,476, or she’ll be able to start clocking every hour she works above 40 to earn time and a half. By this time next year, she’s hoping, she’ll be able to ease a little farther away from a constant worry about money and start saving for a house, think about a family, and “stop being a starving student, which I’ve felt like for a long time.”

Corporate interests and the GOP roundly criticized the measure, calling the overtime expansion a jobs killer and a bane on small businesses, but to the millions of workers affected by the new law, it’s a welcome change.

The rule takes effect December 1, and it doubles the overtime salary threshold, with automatic updates every three years.

“This is a step in the right direction to strengthen and secure the middle class by raising Americans' wages,” Obama wrote in an email to supporters. “When workers have more income, they spend it—often at businesses in their local community—and that helps grow the economy for everyone.”

Employers are moving quickly to figure out how they’ll respond to the changes. Eric Cook is associate director of human resources services at Mammoth HR, a Portland, Ore.-based consulting company that advises mostly small businesses that can’t afford their own separate human resources departments. Last week was a busy one, Cook told Newsweek.

“We’ve had a lot of calls and questions,” Cook said. “We didn’t get many people really freaking out; usually the business owners and managers we’ve talked to are fairly practical people.”

What most of Cook’s clients are planning to do is give their employees raises, bumping them up somewhere above the new threshold of $47,476, which will allow them to continue having workers put in more than 40 hours a week without overtime. Others are moving to reclassify workers as hourly, which isn’t actually required by the law but which some employers seem to believe will make it easier to track overtime. Most of the companies Cook works with have taken the news in stride, he said.

“All of the people I’ve seen on various social media platforms predicting doom and gloom are business lobbyists or management attorneys,” he said. “The arguments against it aren’t very compelling.”

The Depression-era Fair Labor Standard Act’s “guarantee” of a 40-hour workweek has been whittled away at since the late 1970s, according to the National Employment Law Project. The new rules guarantee overtime pay to a third of today’s salaried workforce, the Law Project estimates, up from the 8 percent now covered. “Current regulations give employers a major loophole for avoiding overtime pay, allowing them to classify workers earning as little as $23,440 as managers, though they have scant supervisory or managerial duties, and then require them to put in excessive hours, without any pay at all for their overtime hours,” Christine Owens, executive director of the organization, said in a statement.

Nonprofit agencies are already undergoing training to prepare for the change, Owens told Newsweek. One Rochester, N.Y.-based agency has reviewed its work force of 500 employees to determine who might be subject to the new rule, and is planning on implementing new policies to add efficiency in the work force and prevent employees from needing to put in more than 40 hours to get their jobs done. Others are adjusting salaries.

“Most employers are still in the information gathering and sharing stage,” Owens said.

The law is designed to provide one of two things, added Ross Eisenbrey, vice president of the nonprofit think tank the Economic Policy Institute: “Either give people a reasonable work week, a work-life balance that Congress thinks was the right one, or it’s supposed to compensate them when the employer doesn’t give them that work-life balance,” Eisenbrey told Newsweek.

Employees will now calculate whether it makes more sense to bump people’s salary or start paying overtime, Eisenbrey said. “It gets harder when you have people making $30,000 and $35,000 who never should have been treated as exempt executives in the first place. It’s a shame that the law was allowed to be made more or less obsolete for so long.”