TOPICS > Economy

Are bosses cheating workers out of overtime?

June 18, 2015 at 7:31 PM EDT
If you work more than 40 hours a week, you are supposed to get overtime. But if you are an “executive” earning more than $23,600 a year, you don’t qualify. Economics correspondent Paul Solman explores how this loophole can lead to abuse, and whether regulations will be changing anytime soon.

GWEN IFILL: This month, the administration is expected to revamp workplace rules that would make millions more workers eligible for overtime pay.

Economics correspondent Paul Solman reports. It’s part of our weekly segment, Making Sense, which airs every Thursday on the “NewsHour.”

ACTOR: Time to make the donuts.

PAUL SOLMAN: Fred the Baker…

ACTOR: Time to make the donuts.

PAUL SOLMAN: … icon for the freshness of Dunkin’ Donuts more than 30 years ago.

ACTOR: We make them at least twice every day.

ACTOR: Time to make the donuts.

PAUL SOLMAN: Fred was a fiction, but the reality of one Dunkin’ Donuts worker looked a lot like the ads.

GASSAN MARZUQ, Former Dunkin’ Donuts Manager: I’m working 75 hours a week or 80 hours a week.

PAUL SOLMAN: For years, Gassan Marzuq worked Fred-like hours as a salaried manager at this outlet outside Boston. Problem is, he never saw one cent in overtime.

GASSAN MARZUQ: If you work 40 hours, or if you work 100 hours, it’s the same pay.

PAUL SOLMAN: Divide Marzuq’s hours by his barely $800-a-week salary, and, on a per-hour basis:

GASSAN MARZUQ: I’m making only $9, $10 an hour, which is less — even lower than the regular employees, what they are making.

PAUL SOLMAN: Under current law, you get time-and-a-half for every hour you work in a week past 40, unless you make more than $23,600 a year and you’re an executive, administrator or professional with advanced knowledge.

Marzuq’s employer classified him as an executive, even though he very often did the same work as the hourly employees.

GASSAN MARZUQ: You are serving customers. You are pouring coffee. And you are cleaning. You will clean the bathrooms, clean the parking lot. The title doesn’t mean anything.

PAUL SOLMAN: The salary threshold under which all employees were paid overtime in 1975, if you figure in inflation, would now be $51,000, compared to today’s actual $23,600, an amount that’s been raised just once in the last 40 years.

More than 60 percent of salaried employees were eligible for overtime in 1975. Today, less than 10 percent qualify.

So, last year, President Obama signed a memorandum directing the Department of Labor to update overtime rules to help workers like Marzuq.

BARACK OBAMA, President of the United States: Now, overtime’s a pretty simple idea. If you have to work more, you should get paid more.

PAUL SOLMAN: Progressive mega-investor Nick Hanauer first made us aware of the overtime issue’s contribution to economic inequality in a post on our Making Sense Web site that drew nearly a million readers.

NICK HANAUER, Venture Capitalist: The high overtime threshold is indispensable to creating a thriving middle class, because, in the absence if it, an employer like me will pitch a fake title like assistant manager to somebody and work them 60 hours a week, instead of 40, and get 20 hours of work for free.

SHANNON LISS-RIORDAN, Attorney for Gassan Marzuq: And if these new regulations come out that we’re all hoping will come out, that will help a lot of people going forward.

PAUL SOLMAN: Lawyer Shannon Liss-Riordan argues her client, Gassan Marzuq, should have received overtime and has sued his former employer, which runs 50 Dunkin’ Donuts outlets in Massachusetts.

SHANNON LISS-RIORDAN: This is common practice in America. Because they put their managers on salary, they can work their managers as many hours as they want.

PAUL SOLMAN: Consider former Dollar General store manager Dawn Hughey. She was paid $35,000 a year, but regularly worked 60 to 70 hours a week, no overtime.

DAWN HUGHEY, Former Dollar General Manager: I’m the free help. I could never commit to anything as far as plans with friends or family because my store was always my number one responsibility.

PAUL SOLMAN: Any day now, the administration is expected to redefine which workers are exempt and hike the threshold. Labor advocates say, if it’s boosted to $51,000 a year, more than six million workers would automatically qualify for overtime pay, but, say employers:

DAVID FRENCH, National Retail Federation: We don’t think very many more people are going to get overtime as a result of this rule.

PAUL SOLMAN: Fact is, says David French of the National Retail Federation, his industry simply can’t afford the estimated $9.5 billion a year it would cost to pay overtime to every worker making up to $51,000 a year.

DAVID FRENCH: Instead of providing overtime for millions more workers, employers are going to make rational choices, and they’re going to spread the same amount of money across a slightly larger pool of hourly and part-time workers.

PAUL SOLMAN: In other words, no more behind-the-counter executives.

At White Castle, famous for its square Sliders, Vice President Jamie Richardson thinks the company’s almost 400 salaried general managers will be given lower benefits or switched to hourly jobs. That, he says, would stifle career advancement.

JAMIE RICHARDSON, Vice President, White Castle System, Inc.: It would take opportunity away from literally hundreds of people who worked so hard to get to that point. Our general managers take tremendous pride in being considered salaried. That’s a big accomplishment.

PAUL SOLMAN: Overtime activist Nick Hanauer’s response?

NICK HANAUER: A company has a certain amount of responsibility to hand out. And people are not going to have less responsibility because they don’t have fake titles anymore. It’s just not true.

PAUL SOLMAN: But what about the argument that employers are simply not going to have managers anymore like this, because they can’t afford to, and so everybody will be an hourly employee?

NICK HANAUER: It’s certainly likely that most employers won’t pay people time-and-a-half. That’s very expensive.

And what employers are likely to do is simply add workers to their payrolls, which lowers the unemployment rate, and drives up wages, which is the source of the problem.

PAUL SOLMAN: Whatever the changes, though, they will be too late for Gassan Marzuq.

GASSAN MARZUQ: I never had the time to enjoy my kids’ childhood, to be with them, because I dedicated my life to work at Dunkin’ Donuts.

PAUL SOLMAN: Parent-teacher conferences, did you go to them?


PAUL SOLMAN: Sports activities?


PAUL SOLMAN: Graduation of your kids?

GASSAN MARZUQ: I missed graduations.

PAUL SOLMAN: Because you were working?

Marzuq emigrated to America from Kuwait, shooting for the American dream. But, given the toll the job took, why did he put up with it?

Suppose you had said, no, I’m only going to work 40 hours; I’m sorry; I can’t work anymore; you’re not paying me for that?

GASSAN MARZUQ: Be terminated. If you don’t like it, you will leave. But what are you going to do? I’m not an educated person. I don’t have a degree.

PAUL SOLMAN: And so, these days, Gassan Marzuq pumps gas, a part-time job, no overtime here either.

This is economics correspondent Paul Solman, reporting for the “PBS NewsHour” from Boston.