My latest post for the New York Times Economix blog explains why and how the federal government should update its rules on overtime pay. Here’s the opening:
Since the Fair Labor Standards Act of 1938, it has been established that if you’re an hourly paid worker and you work more than 40 hours per week, you should get overtime pay equal to time and a half, meaning 1.5 times your base wage. For three-quarters of a century, that standard has both rewarded people with a wage premium for working overtime, and provided an important incentive for employers to hire extra workers if they want to avoid paying the overtime premium to their existing work force.
But the law did not stop there. It recognized that certain salaried and white-collar workers should also benefit from overtime pay, as neither their relatively low salaries nor their duties at work should exempt them. So the law created a salary threshold below which salaried workers must get overtime and a set of “duties test” to establish whether salaried workers earning above the threshold were truly engaged in exempt duties for most of their time at work, including supervisory, managerial and executive tasks.
Unfortunately, these parts of the overtime rules have eroded, meaning that millions of workers who should be eligible for overtime are not. Fortunately, President Obama has proposed to update these rules, and double-fortunately, he does not need congressional approval to make this type of regulatory change.