Early in my career enforcing New York labor laws, I handled a case involving workers for Burritoville, a now-defunct chain that had several locations in New York City. Each store only had eight or nine workers total, but almost all of them had elevated titles. I seem to remember an opening manager, a closing manager, a delivery manager, a general manager, an assistant manager.
Of course, they weren’t all managers. They were low-wage immigrant workers who made and delivered burritos, typically working 50 to 70 hours per week, without getting overtime. For most employees, federal and state law require hours past 40 to be paid at 1.5 times a worker’s regular rate. Burritoville wrongly thought it had cleverly found a way around the overtime requirement by labeling the workers as managers and paying them a salary instead of an hourly wage.
Far too many workers have been given highfalutin titles—and maybe a shred of supervisory duties—but they’re low-paid, barely a blip on the org chart, and unfairly don’t get paid overtime despite grueling workweeks.
Employers, sometimes inadvertently and often intentionally, overreach and treat workers as subject to an overtime exemption meant for executive, administrative, and professional employees. The logic behind the exemption, often referred to as the “white-collar exemption,” is that these workers don’t need the law’s protection because they’re more readily able to negotiate fair terms in the market.
But often, mid-level workers with modest if any true authority—think assistant branch managers at banks or assistant managers at fast-food restaurants or retail store locations—have to work extremely long hours without getting overtime because they’re incorrectly slotted by the employer into this exemption. Since they’re paid a salary, the worker’s 41st, 50th, or 60th hour doesn’t cost the employer an extra cent.
The Biden administration last month took a monumental step toward stopping these abuses when the Department of Labor issued a new rule increasing the “salary threshold” for being exempt from overtime protection. The department estimates that in the first year, the rule will make 4 million workers newly entitled to overtime protection and will result in an income transfer of around $1.5 billion from employers to workers.
The white-collar exemption has a duties test, focused on what the worker does—are they really a manager or professional in their core duties?—as well as a salary test focused on how much they earn. The latter injects a bit of common sense into the analysis: No matter what fancy title a person is given (Grand Supreme Boss of Everything!), if they earn below a certain threshold, that person still needs the overtime law’s protection. If your salary is so low you have to get a second job to pay the rent, or it’s a major crisis when the car needs a new muffler, that isn’t the salary of a true executive, administrator, or professional who wields power in the labor market.
The new Biden rule increases the salary threshold considerably. It’s currently $684 per week; after an interim bump in July, it will increase to $1,128 per week on Jan. 1, 2025. After that, it will be adjusted every three years.
The current threshold is far too low; it amounts to around $35,000 per year, and works out to just over $17 per hour. Most of us will likely agree that if you are making $18 or $22 or $25 per hour, you are not a wheeler-dealer in the corner suite, and you should have a right to overtime coverage without having to prove exactly how not-managerial you are. By creating a more reasonable bright line below which most workers will be entitled to overtime coverage, the new threshold will make it far harder for employers to pay a salary of $38,000 or $45,000 per year and then assign truly excessive work schedules without additional compensation for workers.
This new rule will put billions of dollars in the pockets of low and mid-wage workers. But it’s not just about the money: It’s also about allowing people to have reasonable workweeks without excessive hours. Everyone deserves to be able to enjoy time with their families, to see their kids grow up, to reminisce with aging parents, or even just see friends, go to the gym, or have a hobby.
The business groups that will invariably file suit to challenge the new rule should get with the times. Instead of fighting a fair and reasonable rule, they should learn from early-adopter companies that are thriving with a four-day workweek. Congress should recognize that for this rule to be real in people’s lives, they will need to adequately fund enforcement. Meanwhile, state leaders should take action to increase the salary thresholds under state overtime laws in case the Supreme Court’s majority does its usual thing to this critically important new rule.
Above all, the new overtime rule is also about building a humane society. People’s time is valuable, from the assistant bank branch manager to all those faux managers at Burritoville. The law shouldn’t allow employers to squander it as though it’s worth nothing.
