Raising the Overtime Threshold Would Benefit Nearly 1 in 4 Salaried Workers in Wisconsin

Wednesday, September 2, 2015 at 1:51 AM by

Overtime provisions protect some workers who put in long hours, making sure that employees earn extra pay when they work overtime. But many low-paid salaried workers are not eligible to earn overtime pay, making it harder for those workers to climb the economic ladder. That could change under a new proposal that would raise the salary threshold under which workers are considered automatically eligible for overtime pay, a measure that would directly benefit nearly 200,000 workers in Wisconsin.

Current overtime pay rules protect most hourly workers, but leave out many low-paid salaried workers. The Economic Policy Institute explains :

“Salaried workers who earn below $455 per week, or $23,660 per year, are automatically eligible for overtime pay, regardless of the nature of their job or the duties they perform.

Salaried workers whose earnings are $455 per week or more can be exempted from the right to receive overtime if they fall into one of three categories: executives, administrators, and professionals. Each of these exempt categories is defined by a set of duties showing that the exempt employee is skilled and exercises independent judgment, or is a boss with a department and employees to supervise.”

The current, low salary threshold for determining eligibility for overtime pay means that salaried workers who earn as little as $24,000 a year – below the poverty line for a family of four – might not be eligible to receive extra pay for the extra hours they work. EPI explains how the current threshold harms workers with low salaries by exempting them from overtime rules:

“For example, an assistant manager at a fast-food restaurant with a salary of $24,000 and who spends 95% of his or her time cooking fries, running a cash register, and sweeping floors can be required to work 60 or 70 hours a week and yet be denied any overtime pay, simple because he’s classified as a manager. On the weeks he works more than 64 hours, his effective hourly wage is below the federal minimum wage of $7.25; workers who are exempt from overtime regulations are also exempt from minimum-wage regulations.”

A proposed rule drafted by the Department of Labor and endorsed by President Obama would fix the situation by raising the overtime threshold to $50,440 per year, insuring that millions of workers who earn low salaries will be eligible for overtime pay if they work extra hours. The salary threshold has been changed only twice in the last 40 years, and covers far fewer workers than it used to due to the effects of inflation: in 1975, the salary threshold covered 62% of salaried workers, compared to only 8% today. The pending rule change also includes small automatic increases in the salary threshold going forward so that the salary threshold keeps up with rising costs.

The new rule could add as much as $1.3 billion to workers’ pockets, according to administration officials.

Strengthening overtime rules would give a boost to Wisconsin workers with low salaries. Nearly 200,000 workers in Wisconsin would directly benefit from this move, or nearly 1 out of 4 salaried workers in the state.

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The U.S. Department of Labor is soliciting comments on the proposed rule change, and the comment period ends September 4th. You can submit your comment here to let the DOL know that you think that low-paid white collar workers in Wisconsin deserve extra pay if they work extra hours. You can also sign a petition to the DOL at www.fixovertime.org and use the overtime calculator to see how much of an effect the proposed change would have for workers in different situations.

Tamarine Cornelius

3 Responses to “Raising the Overtime Threshold Would Benefit Nearly 1 in 4 Salaried Workers in Wisconsin”

  1. […] in the workplace. These obstacles include a stagnant minimum wage, inadequate federal rules on eligibility for overtime, barriers to accessing child care and affordable health care, and the growing use of on-call […]

  2. Lisa says:

    This policy change is great- especially for those who are working in fast food restaurants as mentioned above. I do feel that this will have a hard hit on small non-profits who can only budget for a small staff and with lack of federal/state funding and many expectations, they (most willingly) will work more than 40 hours. This will be great for some, but not all.

    • Jon Peacock says:

      I think your point about the potential effect on nonprofits is a legitimate concern to raise, but people should be aware that not all nonprofits are affected. Many are essentially exempted by a provision that limits the rule to organizations having an annual dollar volume of sales or business done of at least $500,000.
      According to a Dept. of Labor Q & A document — in determining the annual amount of “business” or sales, “only activities performed for a business purpose are considered and not charitable, religious, educational, or similar activities of organizations operated on a non-profit basis where such activities are not in substantial competition with other businesses.” (http://www.dol.gov/whd/overtime/NPRM2015/faq.htm#5 )

      On the other hand, notwithstanding that exemption, I believe the current and proposed OT rules do apply to elementary and secondary schools and colleges, and to residential care facilities primarily engaged in the care of the sick, the aged, the mentally ill or developmentally disabled who live on the premises.

      Read more here: http://www.epi.org/blog/why-nonprofits-shouldnt-fret-over-the-new-proposed-overtime-rules/