By now most workers understand that American employers regularly minimize their labor costs by classifying as many of their workers as possible as “executives,” “managers,” or “administrators,” paying them a low yearly salary, and requiring them to work long hours for no extra pay. Occasionally some employees in this position convince a jury that their employer misclassified them as managers and put them on salary specifically in order to avoid the requirements of the Fair Labor Standards Act. But each successful lawsuit is a rare exception, which is more than outweighed by the millions that companies save in this way.
In March of 2014, President Obama issued a memorandum declaring that “white collar” exemptions to the Fair Labor Standards Act’s minimum wage and overtime pay requirements are outdated and do not offer enough protection to working Americans. The federal rule was originally designed to limit overtime for highly paid employees, the President notes, but now covers workers earning as little as $23,000 a year. “It doesn’t make sense,” the President said, “that in some cases this rule actually makes it possible for salaried workers to be paid less than the minimum wage.” In this Memorandum the President directed the Department of Labor “to propose revisions to modernize and streamline the existing overtime regulations,” with the aim of decreasing the number of people who qualify for these FLSA exemptions and increasing the pay of those who do qualify.
The process of changing specifying regulations is inevitably arduous, and always vulnerable to the criticism that it is undemocratic. But now Tom Harkin and a handful of other U.S. Senators have introduced legislation–named the “Restoring Overtime Pay for Working Americans Act”–which would bypass these regulatory processes and simply write the President’s suggested changes into the FLSA itself. If adopted, the law would make several changes: 1) it would raise the threshold below which low-paid salary workers must be paid overtime for hours worked in excess of forty per week, from $455 to $1,090 per week, then indexed to inflation. This threshold amount had not been changed since 1975; 2) it would raise the threshold for “highly-compensated” employees from $100,000 to $125,000 per year; 3) it would restore the “primary duty” test for determining qualification for the executive exemption, removed from the regulations in 2004, which specifies that exempt workers must spend more than fifty percent of their time performing exempt job duties; and 4) it would impose a $1,100 penalty on employers that fail to keep complete records of hours and wages.