Secretary of Labor Thomas Perez has submitted a proposed rule addressing employer abuse of the white-collar overtime exemption in the Fair Labor Standards Act (FLSA) to the Office of Management and Budget (OMB) for review.
The FSLA was passed in 1938 and established the 40-hour workweek. The white-collar exemption allows employers to deny overtime compensation to executive, administrative, professional, and outside sales employees.
President Obama issued a directive last March ordering Perez to proposed a revision of the FLSA “white-collar exemption” to address employer abuse and to increase to the rule’s salary basis test which has not been changed since 2004.
The details of Perez’ proposal have not been disclosed. He is expected to recommend increasing the number of people entitled to overtime wages by making it more difficult to qualify for the white-collar exemption.
President Obama said the white-collar exemption “has not kept up with our modern economy.” He noted the FLSA, which was passed to limit overtime for highly paid employees, today covers workers earning as little as $23,000 a year. “[T]his rule actually makes it possible for salaried workers to be paid less than the minimum wage,” the president said. “It’s not right when business owners who treat their employees fairly can be undercut by competitors who aren’t treating their employees right. If you’re working hard, you’re barely making ends meet, you should be paid overtime. Period.”
The threshold to deny exempt workers overtime pay was last set in 2004 at $455 per week. This means that employers must pay overtime to only 12 percent of salaried workers, compared to 65 percent in 1965.
I once worked for a non-profit organization that misclassified many workers who were entitled to overtime pay. These workers were almost all young single mothers who held low-level administrative jobs. They were regularly forced to donate 20 hours or work or more per week to the organization, which required them to spend their meager earnings on childcare. And this was an organization that ostensibly worked for the public good!