The Building Tradesman Newspaper

Friday, September 06, 2019

Decision on overtime pay reduction about to hit workers

By The Building Tradesman

Editor's note: Under current federal law, a non-supervisory worker not covered by a collective bargaining agreement who toils more than 40 hours a week is required to be paid overtime if that worker earns less than $23,600 per year. In 2016, President Obama directed the Labor Department to broaden OT eligibility to those who earn up to $47,476 per year - with automatic inflation adjustments upward. 

Now President Trump's Labor Department is proposing to set OT eligibility to workers who earn less than $35,308 per year, with no automatic inflation increases.

By Heidi Shierholz
Economic Policy Institute

Don’t be fooled by the Trump Administration’s Labor Day pitch on overtime policy—it’s going to cost workers billions.

Soon, the Labor Department under the Trump administration will release its final rule on worker overtime. The rumor is that the administration may showcase the rule around Labor Day and claim they are taking steps to help workers. That means an important public service announcement is in order: do not be fooled! Workers would lose billions under this rule.

It is likely that the final rule will not depart radically from the proposal the administration laid out earlier this year, which was to raise the overtime salary threshold (the threshold under which salaried workers are automatically entitled to overtime pay) to $35,308 a year. 

This is a dramatic weakening of a rule published just three years ago. In 2016, following an exhaustive rule-making process, the Labor Department finalized an overtime rule that would have increased the salary threshold to $47,476, (which was the 40th percentile of the earnings of full-time salaried workers in the lowest wage census region). 

However, a single district court judge in Texas enjoined the Department from enforcing the rule, and the court later erroneously held the rule to be invalid. Instead of defending the threshold from the egregiously flawed logic of the judge, the Labor Department abandoned the rule and proposed their much weaker threshold, which is roughly the 20th percentile of the earnings of full-time salaried workers in the lowest-wage census region.

It’s useful to note that if the overtime rule had simply been adjusted for inflation since 1975, today it would be roughly $56,500. This is more than $20,000 higher than the Trump Administration’s level! The Trump Administration’s weaker rule will leave behind an estimated 8.2 million workers who would have gotten new or strengthened overtime protections under the 2016 rule. 

This includes 4.2 million women, 3.0 million people of color, 4.7 million workers without a college degree, and 2.7 million parents of children under the age of 18. Further, the annual wage gains are $1.2 billion dollars less under the presumed Trump rule than under the 2016 rule—and these annual earnings losses will grow from $1.2 billion to $1.6 billion over the first 10 years of implementation because, unlike the 2016 rule, the Trump administration rule almost surely will not include automatic indexing (to the inflation rate).

So, if you hear the Trump administration touting how many workers will gain overtime protections under its new rule, remember the truth: instead of defending a rule that would have provided protections to millions more, the administration threw those workers under the bus and wrote a dramatically watered-down rule that appealed to the corporate executives whose interests this administration holds dear.
(The Economic Policy Institute is a think-tank backed in part by organized labor).