Overtime Pay

Under the federal Fair Labor Standards Act, about 85 million workers have the right to be paid time-and-a-half if they work more than 40 hours in a week. In 2004, the Bush Administration redefined the law’s eligibility standards to make it easier for employers to avoid paying overtime. The new regulations affect over six million white-collar workers, according to the Economic Policy Institute.1

White-collar workers must meet three separate requirements to be classified as exempt and therefore ineligible for overtime. First, the “salary level” test stipulates that employees who earn less than a certain level each week cannot be exempt. Second, the “salary basis” test mandates that employees must be paid a set salary—not an hourly wage—in order to be exempt.2 Third, the “duties” test requires that a worker receive overtime pay unless his or her duties are primarily “administrative,” “professional,” or “executive” in nature. The Labor Department’s 2004 regulations eliminated the requirement that to be exempt, employees must have the power to exercise a certain amount of discretion or independent judgment in their work. The new regulations also diluted minimum education requirements so that workers with only a high school diploma and a low level of work experience may be classified as exempt.3 For example, employers may exempt as many as 2.3 million production workers who are “team leaders” but whose job descriptions contain no official supervisory authority.4

Jobs directly affected by the rules include police officers, firefighters, licensed practical nurses, emergency medical technicians, dental hygienists, lab technicians, retail managers, insurance claims adjusters, paralegals, draftsmen, surveyors, technical writers, bookkeepers, cooks, factory supervisors and journalists. When workers are reclassified as exempt, not only are they denied time-and-a-half after 40 hours of work, they aren’t able to claim any pay at all for their overtime hours.

Employers who reclassify workers from nonexempt to exempt tend to assign much more overtime work to exempt employees and much less to nonexempt employees. This hurts all workers. The exempt employees are compelled to work harder for less pay while the nonexempt employees lose opportunities to earn the overtime pay that so many depend upon. The result is a massive subsidy to employers at the expense of employees.

Eighteen states (AK, AR, CA, CO, CT, HI, IL, KY, MD, MN, MT, NJ, ND, OR, PA, WA, WV, WI) have their own overtime rules which provide more protection than the federal regulations. For example, Illinois blocked the 2004 federal overtime rules by adopting the regulations in effect before the Bush Administration’s revisions. The legislation, SB 1645—sponsored by then-State Senator Barack Obama—was approved by two-to-one majorities in both the House and Senate.

Seventy-four percent of Americans oppose the Administration’s ruling to eliminate employees’ right to overtime pay. Just 14 percent support the Administration, according to a nationwide poll conducted by Peter Hart Research Associates. Opposition is very broad, encompassing 73 percent of Republicans and 82 percent of households with incomes above $50,000 per year.5