Obama’s overtime proposal explained and why it matters

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U.S. President Barack Obama speaks about the economy during a visit to the University of Wisconsin La Crosse July 2, 2015. REUTERS/Kevin Lamarque  - RTX1ITBH

President Obama’s proposal nearly doubles the overtime salary threshold under which all workers must receive overtime pay. Photo by REUTERS/Kevin Lamarque – RTX1ITBH

Gassan Marzuq never made it to his son’s graduation. A manager at Dunkin’ Donuts, Gassan was working overtime at Dunkin’ Donuts the day his son became a high school graduate.

Missing his son’s graduation, however, was just the salt in the wound. A salaried employee, Gassan had regularly worked 75 hours a week without receiving a dime in overtime pay. His employer would call on him to cover shifts and work extra hours, and unlike the hourly employees, they didn’t have to pay him for it. Why? Because Gassan earned more than the salary threshold of $455 a week (or $23,600 a year) below which all workers are eligible for overtime. And because Marzuq was a manager, his employer classified him as an executive and thus exempt from overtime pay. So he missed his kids’ activities, their parent-teacher conferences, their sports games. He missed their growing up. According to his lawyer, he was never paid for all those hours he spent away working overtime.

Gassan filed a lawsuit against his employer, a company that runs 50 Dunkin’ Donuts shops in Massachusetts, arguing that he should have been paid overtime. Making Sen$e featured his story in a recent segment on overtime pay, and a Making Sen$e post which drew a variety of emotional responses.

Late Monday night, President Obama proposed raising the overtime salary threshold to $50,400 in an op-ed for the Huffington Post. And yesterday, Obama headed to La Crosse, Wisconsin to lay out his proposal. “Now, this is an issue of basic fairness,” Obama told a crowd, “If you work longer, you work harder, you should get paid for it.”

The current overtime salary threshold of $23,660 a year is just below the poverty line for a family of four. If a worker makes less than that, they have to be paid time and a half for every hour they work over 40 hours a week with no exceptions. If a worker makes more than $23,660 and their employer is covered by the federal Fair Labor Standards Act, they may be eligible for overtime pay.

Here’s how it works: Employers do not have to pay overtime to salaried workers who make more than the salary threshold if they have certain executive, professional or administrative jobs. To qualify for the exemption, workers must perform a set of job duties. President Obama’s proposal doesn’t include regulatory changes to this so-called “duties test,” which disappoints labor advocates, but may well be the only bright spot for business leaders.

Business leaders were particularly concerned about the possibility of President Obama proposing, for example, that workers be required to spend a percentage of their time performing specific duties in order to qualify for the exemption. “We see [a change to the duties test] as really detrimental to our business model,” White Castle vice president Jamie Richardson told the PBS NewsHour last month. And David French of the National Retail Federation worried that changes to the duties test could limit the kinds of work managers do. “Right now, a manager can operate as a manager and supervise, but they can also spend a portion of their day filling in, helping with customers, taking inventory, dealing with supplies.” In other words, employers like the flexibility of the current rule.

Labor advocates claim that the duties test gives employers too much leeway. In a press release Tuesday, Christine Owens, executive director of the National Employment Law Project, noted just that: “we are concerned that failure to address the existing test’s vague definition, laissez-faire approach to the mix of ‘salaried’ and ‘hourly’ duties required for exempt statues, and other shortcomings threaten to deny far too many workers the overtime pay protections that they deserve.” Owens urged for specific reforms, including clarifying that exempt workers cannot spend more than half of their time on non-exempt work.

As is, labor advocates worry that workers like Gassan will be given managerial titles, but not any managerial duties. As a result, employers can ask their employees with managerial titles to work long hours and won’t have to pay them overtime.

The complicated nature of the “duties test” hurt Gassan. Because he made a little over $40,000 a year as a manager, his employer could work him 70 hours a week without paying overtime. That meant he was earning $9 or $10 an hour—less than what the hourly employees made per hour.

Gassan’s lawyer, Shannon Liss-Riordan, argues that Gassan deserved to be paid for his overtime work as he was not doing any managerial work. “His case has been so complicated, because the rules themselves are so complicated,” Liss-Riordan noted when Making Sen$e contacted her Tuesday. While Gassan’s case has yet to be resolved, they expect a decision soon.

Gassan was pleased to learn of the President’s proposal to raise the threshold overtime salary in 2016. But, his lawyer notes, the change won’t impact him since he is no longer working at Dunkin’ Donuts. “He would have really been helped by this if this had been in effect.”

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