More than 4 million white-collar workers who thought they were becoming eligible for overtime pay next week are now in limbo, thanks to a federal judge in Texas who blocked a new Obama administration wage and hour rule Tuesday. The unusual decision casts in doubt a federal threshold for overtime pay that has been in place since the Great Depression, and the Obama administration should seek a fast review by the 5th Circuit Court of Appeals.
At issue is how the Labor Department defines who is and isn't eligible for overtime protections. The 1938 Fair Labor Standards Act mandates that most hourly workers who put in more than 40 hours in a single week must be paid at a 50% higher rate for the extra hours. Salaried workers are not automatically covered, though — overtime protections do not apply to many managers or administrative staff under an exemption meant to recognize the differences between the work done by executives, administrators and professionals from that done by laborers.
Congress left it up to the Labor Department to determine how to apply the exemption for salaried workers. From the first regulations under the Roosevelt administration, the Labor Department has set a minimum salary workers must be paid to be considered exempt from the overtime pay rule, in addition to defining the kinds of duties — supervisory work, for instance — they have to perform.
Earlier this year, the Obama administration issued new regulations that would have increased the salary threshold on Dec. 1, making a large number of lower-paid salaried positions eligible for overtime pay for the first time. The current threshold was set in 2004 at $455 a week, or $23,360 a year, a level that is now $940 below the federal poverty line for a family of four — hardly what most people consider a white-collar salary. The administration's regulations would have set the threshold a few notches below the median salary in the lowest-wage region of the country — an estimated $913 a week, or $47,476 annually — and automatically recalculated it every three years to keep up with increases in pay.
Business groups and 21 states, led by Nevada, opposed the new regulations, saying that they would strain budgets, force layoffs and reduce work hours. The challengers also argued that the higher threshold would limit work site flexibility and reduce opportunities for advancement.
Those are not persuasive arguments. If labor costs increase, that's primarily because workers will no longer be putting in uncompensated overtime that, had the threshold kept pace with rising wages, they should have been paid for. It's not workplace flexibility employers seek, but the ability to continue to exploit low- and moderate-salaried workers. And linking professional advancement to how many hours someone will work for free is Dickensian.
In his ruling, Judge Amos L. Mazzant of the East Texas District Court found that although the original wording of the Fair Labor Standards Act gives the Labor Department "significant leeway to establish the types of duties that might qualify an employee for the exemption," the law does not include language indicating that Congress intended the department to set a minimum salary level for exempt workers. "Thus, the Department's delegation is limited by the plain meaning of the statute and Congress's intent," Mazzant wrote.
That interpretation might have been acceptable at some point in the mid-20th century, when the regulation was new. But using salary as one of the determining factors has now been on the books for more than 70 years, under administrations Democratic and Republican. If Congress objected to the Labor Department using salary as a factor in determining exemptions, it has had ample time to do so and amend the laws to state categorically that it didn't want salary used. Congress' lack of action affirms its intent to exempt some work from overtime protections, and to let the secretary of Labor determine how to do it.
The Labor Department disagreed with Mazzant's ruling, as would be expected, and is mulling its options. Any appeal would go through the 5th Circuit, considered the nation's most conservative federal appellate court. We hope that even those justices would recognize that a regulation with a seven-decade history has withstood enough of a test of time to survive this challenge. Hanging in the balance is an element of basic fairness — paying people for their labor and protecting them from exploitation, which is exactly what Congress intended.