The Trump administration announced Thursday that it plans to change labor regulations so that more salaried workers are eligible for overtime pay when they work long hours. But its proposal would benefit far fewer middle-class workers than the stalled plan that the Obama administration put forward just three years ago.
Unlike hourly employees, very few U.S. workers paid on salary are guaranteed time-and-a-half pay when they work more than 40 hours in a week. The Trump plan, developed by the Labor Department, would expand protections to more workers by raising what’s known as the overtime salary threshold ― the salary below which all workers are assured overtime pay.
For more than a decade, that threshold has remained a measly $23,660. That means if your salary is greater than that, you can work unlimited hours in a week and earn nothing more than your base salary. The Trump proposal would raise the threshold to roughly $35,000, expanding the universe of workers entitled to time-and-a-half pay.
“Our economy has more job openings than job seekers and more Americans are joining the labor force,” Labor Secretary Alexander Acosta said in a statement. “[T]oday’s proposal would bring common sense, consistency, and higher wages to working Americans.”
But worker advocates say the administration is doing the employer lobby a favor, by proposing a threshold that they say is still too low. By not raising it even higher, they say, companies will still be allowed to work many of their employees excessive hours knowing they won’t have to pay them anything extra for it.
Democrats piled on the plan before it was even officially released. “If the Trump administration follows through on this rule, it would be breaking its promise to hardworking Americans,” Sen. Sherrod Brown (D-Ohio) said in a statement.
The Obama administration tried to reform the overtime rules in a more aggressive and worker-friendly way. In 2016, they released a plan to roughly double the salary threshold, to $47,476. It was one of the most ambitious economic reforms of Obama’s presidency, a plan he said would restore higher wages and leisure time to overworked Americans.
And yet it never made its way into law. Most employers despised the plan, calling it a job killer. The proposal would have left them with an unpleasant choice: either cap their workers at 40 hours, or start paying them more for their extra work. They sued to stop it from going into effect. A federal judge in Texas granted an injunction in 2016, saying Obama’s Labor Department exceeded its authority the way it wrote the new rule.
After Trump won the 2016 election, it soon became clear the new administration would not try to keep the popular Obama plan alive, even though polling showed a majority of voters liked it. Soon-to-be-Labor Secretary Alexander Acosta signaled in his 2017 confirmation hearing that he envisioned a more employer-friendly reform, floating a salary threshold in the mid-$30,000s.
Overtime pay has become a foreign concept to most American workers who are paid a salary rather than an hourly wage.
The Economic Policy Institute, a left-leaning think tank that was influential in the crafting of the Obama plan, estimated that the 2016 proposal would have impacted more than 12 million workers. (Other estimates have put the number lower.) In a recent blog post criticizing the Trump administration, the think tank said a threshold of $35,000 would carve out more than half of the workers who would have gained protections under the Obama plan.
“That means this administration is effectively turning its back on millions of workers,” wrote Heidi Shierholz, an EPI economist who served as the Labor Department’s chief economist under Obama. “Trump and his cabinet are again siding with corporate interests over those of working people.”
Bloomberg Law first reported that the Trump administration planned to release a rule with a $35,000 threshold.
Enacted during the Great Depression, the overtime law was supposed to prevent employers from working employees unreasonable hours. It did so by making any labor beyond 40 hours more expensive, through the time-and-a-half premium. That also encouraged employers to spread the work around to more people, keeping the unemployment rate down.
But as time has passed and the rules haven’t been updated, fewer and fewer workers are covered by them. Many employers, particularly in the retail sector, work their way around the rules by classifying their employees as “managers,” who are easier to exempt from time-and-a-half pay. As HuffPost has reported, many retail managers end up working 70 or even 80 hours a week for flat salaries in the $30,000s, doing much of the same work their underlings do.
As it stands, overtime pay has become a foreign concept to most American workers who are paid a salary rather than an hourly wage. According to EPI, a mere seven percent of salaried workers currently enjoy overtime protections. That’s down from around 60 percent in the 1970s.
Even though Trump’s overtime plan doesn’t require approval from Congress, there’s no guarantee it will be implemented while he’s in office. Like the Obama rule, this one could very well face lawsuits ― not just from worker advocates who think it does too little, but from employers who still think it does too much. After all, their labor costs will still go up because of it.