Since 1975, millions of American workers have been scammed out of bringing home a salary that reflects the time they have dedicated to their job. How have bosses managed to get away with this insidious form of wage theft? The title “assistant manager” and others like it paved the way.
For decades, employers have gotten away with “promoting” the best of their hourly-paid workers into salaried positions, resulting in many workers losing out on any overtime pay when working more than 40 hours per week. This is far from rare. Between five to fifteen million workers have been classified into low-paid “management” positions and continue to miss out on a wage that is representative of their work and title. The Economic Policy Institute estimates only 8 percent of salaried workers qualify for overtime now. And their bosses are the ones who benefit. In an era of unprecedented CEO salaries – in 2014, CEOs on average made 937% more than they did in 1978, even after adjusting for inflation – it’s tragic to think of workers laboring without being paid for all of the hours they worked and sharing in prosperity they helped to create.
How did we get here? The law establishing when a worker could be considered a manager (and no longer eligible for overtime pay) was written 1975 and was intended to cover well-paid bosses in white-collar industries. At the time it covered about half of all salaried workers. Based on those original provisions and updates to it made by the Bush Administration in 2004, a salaried worker can bring home as little as $23,660 a year — considered poverty level for a family of four — and still not qualify for overtime!
In a recent OpEd to In These Times, United Steel Workers President Leo Gerard explained the uphill battle workers have faced over the years to be paid for overtime:
Businesses always find big bucks for the boss. He wants a raise; he gets it. No problem. For workers whose sweat of the brow produces profits, well, somehow there’s never a cent for them.
No way could they pay, they protested! The proposed rule would bankrupt America, they raged. It’s not humanly possible, they fumed, for corporations that pad CEO paychecks with millions in bonuses to also manage to pay time and a half when workers labor more than 40 hours a week. Can’t be done, they cried! Well, except that it has been done since 1938.
That’s when the Fair Labor Standards Act passed. It created the 40-hour work week and overtime rules. It required that businesses pay time and a half to all hourly workers for each hour of labor after 40 in a week. It also required employers to pay time and a half to all salaried workers who were not highly compensated professionals, executives or administrators.
Fortunately, this outdated law is getting a long overdue reboot. Under an Executive Order from President Obama, the Labor Department is updating the 1975 overtime law. This would change the law so that salaried employees earning less than $50,440 a year would now be guaranteed overtime pay: time-and-a-half pay for every hour worked over 40 hours each week. This new salary threshold would go into effect next year and would also be tied to inflation so we don’t run into this problem again. An estimated 5 million workers would be affected by this change and will start earning the correct salary for hours worked.
California has led the way in addressing the inequities in overtime law. In our state, the threshold is significantly higher — $37,440, rising to $41,600 in January of 2016. That’s because we peg the cap to twice the minimum wage. Eligible California workers also get overtime pay after working eight hours in a day, not just when they surpass 40 hours in a week. Still, the new executive order would benefit 420,000 California workers according to White House estimates.
And according to Gerard, paying their workers fair pay for hours worked is something corporations should be able to manage:
President Obama proposed setting the salary threshold under which employers would have to pay overtime to salaried workers at $50,440 a year. Taking inflation into account, that is the level at which it was set in 1975.
Somehow, corporations managed to pay time and a half for overtime worked by employees in that salary range in 1975. Maybe those CEOs were smarter than today’s crew caterwauling that they can’t do it.
….In 1965, CEOs at the nation’s 350 largest public firms made 20 times the pay of a typical worker employed by those companies. After the 1970s, however, worker pay stalled while CEO pay supersized. Since 1979, the compensation of the top 1 percent grew 138 percent while the wages of the bottom 90 percent rose just 15 percent. Now those CEOs get 300 times the typical worker’s pay. CEOs at the top 350 companies in 2013 pulled down an average of $15.2 million a year, up 21.7 percent since 2010.
CEOs contended their corporations are too poor to pay overtime, but on their next quarterly call with shareholders, they’ll brag about record profits.
AFL-CIO President Richard Trumka also weighed in on this much needed boost for the American middle class:
Millions of America’s workers are one step closer to earning the overtime pay they rightfully deserve but have been systematically denied. Working people called on President Obama to go bold, and his response will provide a much needed boost to our entire economy. This is a critically important step forward for the Raising Wages Agenda, but it is just that — a first step.
The labor movement is committed to ensuring workers’ voices are heard, ensuring that this proposal is strengthened and fully implemented. We recognize that while the proposal will help millions of workers across the country, millions more will still be denied overtime pay by their employer. We will continue fighting until every worker who deserves overtime protections is paid for all their time worked.
To learn more about overtime pay, calculate your potential benefit from overtime reform, and show your support: visit FixOvertime.org and sign the petition to Department of Labor Secretary Thomas Perez today!