WASHINGTON – Longtime progressive lawmakers and labor advocates are hopeful that the Biden administration will be more emboldened to expand overtime pay rules in the coming months after a recent Supreme Court ruling in an employment law case and if the president’s new nominee to lead the Labor Department is confirmed.
At the center of overtime pay regulations is the Fair Labor Standards Act, a law that specifies what types of employees are “exempt” or “nonexempt” from overtime pay. Under this law, eligible employees generally receive at least time and a half pay for any work they put in over 40 hours a week. Generally, employees are exempt from overtime pay if they make at least $684 a week or $35,568 a year, and serve in executive roles, according to the Department of Labor’s definition. Nonexempt employees who do not work in executive roles and are typically paid hourly or earn less than the minimum amount defined by the DOL, entitling them to overtime.
The Labor Department announced last year in its rulemaking agenda that it would revisit the pay threshold and exempt categories. It is expected to announce changes in May, and some are expecting that the Labor Department could significantly raise the salary threshold.
Rep. Pramila Jayapal (D-Calif.) said that the Congressional Progressive Caucus is preparing an executive action agenda to present to President Biden, which includes an item that would increase overtime eligibility for workers.
Jayapal said that the president is “very, very interested” in expanding overtime pay for workers by raising the threshold for eligibility.
“It is a really important and effective way to increase wages for millions of workers,” Jayapal told Medill News Service. “So the question is really what that threshold should be set up.”
The CPC has urged the Labor Department to increase the threshold for overtime pay to $82,732 from its current level of $35,568, as outlined in a letter sent this summer to former Labor Secretary Marty Walsh and signed by 21 members.
The Supreme Court also ruled on this regulation in Helix Energy Solutions Group v. Hewitt. In the case, the Court determined that a worker who earned more than $200,000 a year and was paid a day rate as a “tool-pusher” at Helix Energy Solutions was still eligible for overtime pay. Justice Elena Kagan wrote in the majority opinion that because Hewitt was paid on a daily rate rather than a salary basis, he was entitled to overtime pay, despite him being a “high-earning employee.”
Patricia Campos-Medina, the executive director for the Worker Institute at Cornell University, said the Supreme Court’s ruling gives credence to the enforcement of fair labor practices.
“Workers feel more empowered to demand their rights and I’m glad to see the Supreme Court just following the intent of the law, which is to actually guarantee basic rights to workers,” said Campos-Medina.
Changes could be looming
Andrew P. Burnside, a shareholder at a labor and employment law firm, expects the Biden administration to take “rigorous administrative action” with updating overtime pay regulations.
Democratic lawmakers tried to change the overtime pay in the past through legislation but bills have not made it through both chambers of Congress. For instance, Sens. Sherrod Brown (D-Ohio) and Patty Murray (D-Wash.), and Reps. Bobby Scott (D-Va.) and Mark Takano (D-Calif.), introduced the Restoring Overtime Pay Act in 2017 and again in 2019. This legislation would update the salary level for overtime pay exemption to the 40th percentile of wages in the lowest wage census region as determined by the Bureau of Labor Statistics. It also called for automatic revisions of the threshold every three years to reflect the state of the economy.
Republicans too have tried to tweak the law. Sen. Mike Lee (R-Utah), proposed legislation to provide private-sector workers with the choice between receiving financial compensation or paid time off for their overtime hours under the Working Families Flexibility Act. The bill failed to advance in Congress.
This consideration of overtime pay regulations coincides with Biden’s nomination of Julie Su for labor secretary. Su, as deputy labor secretary under Marty Walsh, will wield the power to push some prominent regulatory items, including raising the cutoff for salaried workers to receive overtime pay.
In a statement following Su’s nomination, Sen. Chuck Schumer (D-N.Y.) mentioned working with the new labor secretary on “updating the outdated overtime rule to pay workers what they’ve earned.”
Jason Solomon, the director of the National Institute for Workers’ Rights, said he is confident that Su will fight for workers as labor secretary.
“Certainly any senator who wants to be on the side of working people should appoint her really quickly and enthusiastically so that these overtime regulations can be issued without further delay,” Solomon said.
Su, however, appears to face a tough confirmation process. In 2021, Su was confirmed on a party-line vote for deputy labor secretary, and some Republicans have already expressed concerns with her nomination to the top post.
Sen. Susan Collins (R-Maine) criticized Su over her handling of California’s unemployment insurance system during the pandemic, which resulted in billions in jobless benefits lost to fraud. Additionally, Sen. Bill Cassidy (R-La.) called out Su for advancing “anti-worker regulations that will dismantle the gig economy,” citing a proposed rule change to classify who is an independent contractor.
Burnside said he expects a contentious confirmation process for Su based on possible regulatory changes.
“It looks like there will very likely be a fight over her nomination, and some of that may have to do with some of these (FLSA) regulations that are in the pipeline,” Burnside said.
Other of Biden’s labor nominees have faced problems with confirmation, highlighting the tension over changing labor laws. Last spring, David Weil, the president’s nominee to lead the Labor Department’s Wage and Hour Division, failed to advance in the Senate after three Democrats joined Republicans in voting against his nomination. Weil, who served in the role under President Barack Obama, was criticized by Republicans for his proposal of expanding worker eligibility for overtime pay, among other policies.
Business groups have also resisted any proposed changes to overtime pay rules in the past. In 2016, a federal judge blocked the Obama administration’s proposal to raise the minimum cutoff for overtime pay to over $47,000 in a case brought by states and business leaders. Plaintiffs argued that new overtime rules would force states to cash out millions in additional salary payments and could lead to job losses.
In 2019, the Trump administration raised the threshold for workers to earn overtime pay from $23,600 to over $35,000, but some labor leaders say it didn’t cover as many workers as the Obama proposal would have.
Ed Egee, the National Retail Federation’s vice president of government and workforce development, argued that expanding the overtime rules would harm businesses.
“The post-pandemic environment has presented a number of challenges for retail employers, including workforce shortages, changes to the nature of the workplace and inflation concerns,” Egee said in a statement to Medill News Service. “Should the Labor Department change overtime regulations, it would have a detrimental impact on retailers’ ability to offer the most flexible, generous, and tailored benefits packages to lower-level exempt employees.
In the meantime, some states are taking matters into their own hands when it comes to expanding overtime eligibility.
The Washington State Department of Labor and Industries updated its rules in 2019 to implement a staggered increase in the eligibility threshold, reaching over $80,000 by 2028. This rule change was applauded by supporters as creating one of the strongest overtime laws in the country.
Businesses are already worried about this rule change and the burden on employers to meet new threshold standards. Jake Mayson, the director of public policy at Greater Spokane Incorporated, said smaller businesses are particularly disadvantaged by these overtime regulations.
“The smaller businesses simply don’t have the resources to to bring somebody up to the new thresholds which are I think objectively pretty high,” Mayson said. “Those are the impacts that we’re really looking at, the ability to attract and retain talent in manager level roles, especially when it comes to small businesses.”
Beyond updating overtime pay regulations, advocates are also looking for the government to better inform workers of their rights under federal law. Alex Granovsky, a labor and employment attorney, said that employers can abuse salary and employment classification to avoid paying their workers overtime. Labor Department Labor Secretary Marty Walsh
“The problem is that the people who are being hurt by employers breaking these laws aren’t aware of their rights,” Granovsky said. “The fact that you’re paid a salary and the fact that you have a certain title, those are both artifices… they’re not the law.”