The Nightmare of the Labor Department’s New Overtime Rule

The Labor Department’s new overtime rule proposal changes the minimum salary level for overtime exemption from $23,660 to $50,440 starting in 2016 or whenever the rule is implemented. Currently, of course, just offering a salary at a certain level doesn’t mean an employee qualifies–the job description still has to meet the qualifications for exemption. This change means everyone earning less than $50,440 is automatically eligible for overtime, regardless of actual responsibilities.

To be clear, while the goal of this change is to makemore people eligible for time and a half for working overtime, it’s a huge step backward. We’re not the manufacturing economy that the original Fair Labor Standards Act was designed for. We’re a knowledge economy and knowledge is much harder to measure in terms of hours than manufacturing is. You can’t accurately judge how long it took someone to come up with an idea, the way you can judge how long it took someone to manufacture a widget. Do you pay someone for the time they spent pondering a work related problem while jogging? It’s complicated.

You can’t pay for knowledge by the hour. But this new rules make you do just that. Here’s what you need to do to implement the new rule.

To keep reading, click here: The Nightmare of the Labor Department’s New Overtime Rule

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32 thoughts on “The Nightmare of the Labor Department’s New Overtime Rule

  1. It’s not that complicated. If I’m *required* to answer emails and questions after hours I should be paid overtime for those efforts. If I’m required to stay late to finish a project I should be paid overtime. Overtime is for time WORKED not time thinking.

    If you want to check your email at home or on your phone my employer has a form where your manager signs off saying it is needed. If an employee qualifies for overtime they usually do not receive access.

    A nightmare is overstating this. The hardest thing employers are going to have to do is start managing. Not paying overtime is just another dumb argument to keep wages down.

    1. It takes me about 1 hour to write each of my articles. That’s one hour, sitting at the computer typing. That’s what a boss can *see.*

      How long does it take to develop each idea? A lot longer. I can’t measure it. I can’t necessarily control it either. This morning, I was listening to This American LIfe while on the elliptical at the gym. It gave me an idea. Under this pay scheme, since I had an idea that will develop into an article, should I bill for time on the elliptical? (I’m a contractor, so no worries, and I bill flat rate for everywhere but INC, where I’m paid by the hit).

      This is why this is a bad idea. Knowledge workers can’t be paid by the hour, because knowledge doesn’t turn off and on.

      1. I guess companies will just have to pay “knowledge workers” the amount the new law thinks that’s worth. The test isn’t whether the potential for overtime exists but whether they fit the criteria for exempt, and that criteria now includes a salary level that adequately compensates them for that “thinking time.” This is one of the lamest justifications for exploiting low wage workers that I’ve ever seen.

        1. The market determines what someone is worth. And $45k is hardly low wage, but now you can’t be exempt at $45k.

          It also kills part time professional positions. Unless you’re making the equivalent of over $100k Full Time, you can’t work 50 percent and be exempt. You know who will suffer from that? Women. Women love to work part time.

          As long as you’re legal to work, you’re not being exploited by your agreed upon salary. If you don’t like it, find a new job and quit.

          1. “As long as you’re legal to work, you’re not being exploited by your agreed upon salary. If you don’t like it, find a new job and quit.”
            Then why even have a minimum wage? The reality is, especially when/where unemployment is high, many employers will pay as little as they possibly can, even if the employee’s work brings great value. And I believe that is immoral (why, yes, I am a liberal)

            1. Minimum wage is also a terrible way to do things so bringing that up is pointless and a red herring.

              Your comment about employers paying as little as possible is called market demand. You may think it’s “immoral” but I think it’s more immoral to force (under threat of imprisonment) a business owner to pay what the government thinks is “fair”. That owner took all the risk and in the vast majority of cases took a lot of losses over the years to be successful. So now, the benevolent government comes along and says “Hey, you’re way to successful. We’re gonna need you to fork over more money because we think you’re not being nice.”

              I agree with EHRL… You don’t like your pay, find another job and quit OR start your own company. If you had any clue what kind of nonsense you have to go through to run a business, you wouldn’t be so “liberal”. It’s so easy to spend other people’s money.

              How do I know? I ran a business and my wife does financial consulting for SMALL businesses and you’d cry if you saw how the government beats up on these folks. Then you wonder why pay is so low for employees.

      2. The problem is how do you evaluate what a knowledge worker is? Is a carpenter who knows how to build a hip roof for your home a knowledge worker? You are paying for his knowledge. How about the mechanic who knows how to fix your car? Even the lowly person making your McBurger must follow a process and know that how to run the cash register and keep the restaurant clean to meet the health department standards. I would argue that every job is a knowledge job. Some might be easier to learn, but that only lessens their value to the economy, i.e. the rate of recompense, not the knowledge inherent in the skill.

      3. You are not paid by the hour, you are paid to produce. If it takes you 10 hours to produce what another can do in 2, then expect to get reviewed and dismissed.

  2. “Overtime is for time WORKED not time thinking.”

    Many jobs require a lot of thinking. My job is solely thinking (and writing down my thoughts). This exempt / non-exempt distinction is not set up for knowledge workers. My most productive time is sometimes in the shower, even when I’ve been working on something for days in the office.

    If I were to actually be paid by the hour… well I can’t even imagine how that would work.

    1. Same here! I cannot imagine how I would even go about that.

      If I just charged by the hours I spent doing actual writing, it would look like I made a fantastic salary! But, most of the work of writing is the thought process behind it.

      1. Please, please, please EHRL stop putting yourself into the middle of this discussion. You are a contractor, not a “knowledge worker”. You operate in the gig-economy and charge the rate you think you can get on the market place and spend the time as you see fit to accomplish that task. Comparing yourself to a regular salaried or non-salaried worker is ridiculous. A part-time “knowledge worker” is just that – an hourly-paid individual who is paid HOURLY for the time it is assumed they are working. If they come up with a brilliant idea in the shower and write themselves a note for use later in the office it no-one is going to try to get them paid for that time. The same way said workers aren’t docked for NOT thinking on the job. And we all know people who aren’t actually working on the job, hourly or not.

        The actual use of this overtime change is to stop retail (especially) and food-service workers making $13/hr from being designated “managers” when they are really the same as the floor workers and making them work ridiculous hours for ridiculously small “salaries”.
        Normally I agree with what you write, but not today.

        1. If they are the same as the floor workers, just with a manager label, then they are incorrectly labeled as exempt, and that can fix the problem.

  3. I’ll concede that this isn’t a perfect system, but I’m inclined to agree with the proposed changes. Part of the reason for creating the FLSA was to push employers to properly staff their offices rather than just push any remaining work on to exempt staff. This also reduces over-work and ideally would allow for a more healthy work-like balance in the age of being connected 24/7. I imagine a not insignificant number of employers push non-exempt work onto exempt staff to avoid hiring more people. Also, eliminating the primary duty requirement could help a lot workers avoid work that’s inherently not related to the primary reason for which the job was created.

    Just my two cents. And thanks for the article. I always enjoy your posts!

    1. Yes. I am hoping this will reduce some of the worst exploitation. Working 60 hours a week for $30,000 a year. Maybe, just maybe, we can find a little better work/life balance. I don’t think we should be laying off two people and letting the third do all the work with no salary increase.

      I do concede it will take some time and work for companies to figure this out.

  4. Unwinnable. At one firm, I was a “professional” doing software documentation. 50 hour weeks were mandatory for all staff (all professional of course). Pay was for 40 hours. I never worked less than 60 and went as high as 80. My “page rate” was about 50/week (yes, that was 12,000 per year). On another job doing docs (big city/small town company) again had mandatory 50s. Contracting firm collected time and half, I was paid straight time. Protest you say? That would have been immediate termination with an invented reason and rendered me unemployable (note SMALL town). Professionals are very clever when deciding to include/exclude based on which may be less expensive.

  5. I have no problem with the rule, and I think calling it a “nightmare” is scaremongering. If you’re a knowledge worker in my neck of the woods (east coast but moderate COL), you better be making at least 50K – and if not, shame on your employer. I’m research faculty in a very large private research university. The very bottom rung of our research workers are paid 50K, and that is low – we’ve been trying to get the powers that be to raise the pay band for years but they have refused, even as we bring in increasing amounts of grant money, which is what pays salaries (this is a prestigious place to work, so we can still attract talent paying below market, but attrition is fairly high). Hopefully this rule will finally spur some movement.
    I think there are a fair number of employers who don’t adequately value their people and who make short-sighted decisions in the name of pleasing their shareholders or board rather than recruiting or retaining the folks who actually create value. They *should* be paying them more, and if it takes a federal rule to make it happen, so be it.
    *Note that I am exempt and well above the 50K limit, so I personally have no skin in this game

  6. Suzanne,
    So my exempt coworker who made $55K full time and has dropped down to a .8 (because of the baby) becomes non-exempt because she is making $44k? She wouldn’t get overtime unless she works over 40 hours, so that means that she wouldn’t even benefit from the overtime unless she worked the equivalent of an extra day?

    1. Yep. I was in a job share for 4 years, my salary (at the end) was $48k for 20 hours a week. Fabulous job, right? There is no way on God’s green earth that the powers that be would have approved the job share if my partner and I had to both be non-exempt. No way. The record keeping alone is a super duper pain.

      It’s a ridiculous rule.

  7. It seems to me that the intent of the law is to protect low-wage workers who are being taken advantage of, such as retail mangers making $33k and working 60+ hours per week.

    Not all salaried positions are primarily thinking positions. I work in tax and have a masters degree. I’m salaried, $40k per year. I often work 6-7 days, 50-60+ hours per week. None of my work is done in the shower or while jogging. My work is done sitting in front of a computer screen, missing out on time with my family.

    I genuinely do love my job, but it is a bit galling to work seven days straight for weeks in a row on a salary of $40k with no overtime. People say “if you don’t like it, go find a better job”, sure, in theory that’s great. But people don’t stay in low-paying jobs because they get a masochistic kick out of it, and I have yet to find a tree that grows a surplus of high-paying jobs. 🙂

    1. The reality is, if you can’t find someone that will pay you more than you are making, you’re not worth more money. I know that sounds harsh, but it’s true.

      The market sets these things. Watch and see–hourly rates will be adjusted downwards for people who are currently exempt and work more than 40 hours a week. No one is getting rich off this.

    2. I hope this doesn’t come across as rude; because I certainly do not mean it that way.

      But, if you’re putting in 60 hours a week, 7 days a week whose fault is that?

      Sure, you might very well end up unemployed if you tell them no. But, they are willing to “take advantage” of you because so many employees are willing to lay down and be a carpet.

      Yes, this economy is “squid lips.” In fact it is rotten squid lips. But, that doesn’t mean you have to stay in a job working 7 days a week for 40K .

      Last year I left a job (I did manage to get another one lined up beforehand) that was great pay (way more than 40K!), great benefits, rather nice colleagues; but, the hours were as you describe; with no end in sight. Management’s standard operating procedure seemed to be “this is Number One priority!” on every project and “we need it done now!”

      I pointed out to them that if everything is “priority One” then nothing is priority One. They didn’t get it and never will. So, I left. It was then that I found out I was the 6th person in that position in the last 3 years. (I lasted most of the year, way more than the average of others before me. And I have seen the same position listed twice this year since January).

      True, there is no “tree that grows a surplus of high-paying jobs.” But, 40K isn’t that high paying and really at 60 hours per week you are making around 12-13 dollars an hour. I think you should ask yourself if it is worth it. In my case I said no, I want/need a life outside of the office. And 5 other people before me decided the same.

      Some employers don’t get it and never will – law or not. They will find a way around it.

  8. My cynical self wonders what will happen to the exempt fast food manager, for instance, who is working 50 or 60 hours a week for $35K per year, no overtime. I see the fast food place making that employee non-exempt, capping hours at 40, and hiring a part time person for the rest of the time. I can’t fathom the store saying oh, keep working the overtime, now we’ll pay you time and a half for the 20 hours or so over 40 hours, and pay you another 5K or more per year in OT.

    I just wonder if this will hurt more than it helps.

    1. I see it happening that this manager will start being paid $13 / hr, so that their total compensation at 50-60 hours a week (10-20 of it being overtime) doesn’t change. They won’t be any better off, and the employer will be in the same position as well.

      1. I dunno, they will either get paid more to make them exempt or having their working hours limited so they are free to pursue other things. I know from personal experience that low-level managers at some of the fast-food/big box retailers are essentially trapped in their positions. They work some pretty punishing hours making it difficult to make time for training or education to improve their skills or find a second job for extra income. Finally, prior to the new rule companies had no incentive to become more efficient or effective especially towards their lower level managers. Why drive improvement and innovation when you can just work someone until they break then cast them aside. Bottom line, this rule update is very likely a good thing and usual corporate whining about having to spend more is not particularly relevant since they have been spoiled the past few years with getting one employee to do the job of two or three.

  9. It is hard to understand how knowledge workers bill for their time. In a classic case of an attorney, there are ethical guidelines for when it is appropriate to bill a client. Practicing your open argument in the shower is billable time, thinking of a client on the drive home is not. It means that attorneys work a lot of hours to get to 40 billable hours for the week, much of the work they do isn’t ethically billable (even with a fee agreement that lets them round up effort to the nearest 15 minute increment). Most other knowledge workers are contractors or consultants, estimating the amount of effort then being surprised at their bad estimates due to the unforeseen. Contractor’s change order you to death, consultants often try the Scope Change order. And all that “equal bargaining power” mantra falls apart when the knowledge worker is an employee. In all the previous cases, the relationship was that of provider and purchaser- roughly equal. In the idea of overtime with rough correlation to salary, because of the inherent loss of bargaining power of the employee, the curb on the employer’s behavior and habit of getting “free” work is needed. Its easy to say the employee can simply leave, but it never is easy for the employee.

    1. As a former contractor those change orders and scope change clauses are absolutely crucial. Scope creep is a very real plague and can kill your profitability quite quickly if it goes unchecked. I do agree that with employees the dynamic changes. There is less ability to push back against creep and if you succeed once then you are blessed with doing it again.

  10. So, I Travel for work. A lot. I go to weekend trade shows, visit customers, etc. How does this work for me? I work 50 hours most weeks, but with travel time some weeks are 100 plus, and I then work less the next week, which I don’t mind but which is not ok under OT laws. will they really need to give me a 10k raise? Or have me clock in and out?

    Also, our sales guys make 50k plus commission, how does that work?

    1. If you travel that much, you ought to be salaried, not hourly, and yes, you deserve a raise. Or they can make you hourly and there are rules already about how to pay hourly folks who are travelling that do not require you to clock in or clock out on the road but do pay you some (but not 24 hr) overtime. And if you then have less hours the next week (as non-exempt) the budget can be balanced that way as it already is since your company sounds smart about giving you time off. The difference is only paperwork if it is done right. 🙂

  11. Frankly, I see this as a win-win. Over-worked under paid staff will either get hours cut to below-40 and more staff hired or will get paid overtime. If they need more cash and have to work 2 jobs that is already happening but without the pay. and the other job might just hire your good worker out from under you!
    There’s really no greater difficulty now than there was before about hourly tracking. That’s what we have computers for. You log in and you log out. We use those programs all the time. Do I sometimes go to work and spend a lot of time blankly staring and trying to figure out a problem? Don’t we all in the knowledge economy?
    If I want to time-share with another staff member, we both go hourly, take a “wage cut” and see how it sifts out. If you normally work 50 hours for $60K ($23.08/hr even if you don’t like to think of it that way) and you are now budgeted for $30K, realistically estimate your time and stick with it. You won’t get overtime, but you do both get functional part-time. Might work, might not, but that is the way flex time has always been. Remember, you can always revert to hourly. You are NEVER required to be paid as exempt if you and the boss agree not to.

  12. The minimum weekly salary under the FLSA was initially set in 1940 at $200 per week. That’s $3400/week ($176000 per year) in 2015 dollars. The law’s obvious intent was that only very high level employees could be exempt. What’s being addressed now is the abusive practice of hiring someone in retail, paying them $25000 and calling them an assistant manager so they are exempt. Then they work 60 hours a week.

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