State Should Act Swiftly to Guarantee Modestly Paid Workers Fair Pay for Long Hours

October 31, 2017 by Christopher Meyer in Blog, Economic Opportunity

Every year, 233,000 Maryland workers with modest salaries put in long hours without getting paid for it. A regulation originally slated to take effect last year would have changed that by updating the federal overtime threshold for decades of inflation. Instead, a flawed judicial decision put the rule on hold. Until recently, the Trump administration seemed likely to allow the rule to die in court. While it now appears that the administration will propose a weaker expansion covering fewer workers, one thing remains clear: hardworking Marylanders should not be held at the mercy of unpredictable federal policy. The state should act swiftly to expand overtime protections on its own, ensuring that hundreds of thousands of Maryland workers get paid for every hour they work.

Federal overtime protections have existed since 1938, when they were passed as part of the Fair Labor Standards Act. They serve dual purposes, ensuring both that workers are paid for every hour they spend on the job and that they have time to spend with their families and attend to their own lives. The law has always included an exemption for “administrative, executive, and professional” workers—historically, high-status employees whose job duties often require long hours, but who are well compensated for their work. However, decades of federal neglect have slowly allowed this exemption to expand, until it now bears little resemblance to its original purpose.

In 2016, the Labor Department adopted a rule raising the minimum salary threshold below which employers cannot claim the exemption. The threshold currently stands just below $24,000 per year, about 60 percent less in inflation-adjusted terms than its value in the 1970s. At that time, the majority of full-time salaried workers were automatically eligible for overtime. Today, less than one in 10 are. While working a 50-hour week might be reasonable for a well-compensated CEO, it places an unfair burden on working people who are getting by on wages that are just above the federal poverty line. The 2016 rule would have partially restored the earlier standard, extending overtime protections to employees who take home up to $47,500 per year, or one-third of full-time salaried workers. However, the rule has been stuck in court since late last year.

The Trump administration has repeatedly expressed dissatisfaction with the 2016 rule, and until recently it seemed likely that the administration would refuse to appeal the current judicial block on the rule, effectively killing it for good. However, the administration last week announced that it would repeal the ruling, possibly as the first step toward adopting a weaker regulation that would not guarantee protection to workers who take home more than $32,000 per year. While the decision to appeal the court’s flawed decision is welcome, the weaker rule under consideration at the Labor Department is an inadequate fix to support workers and our economy.

The Trump administration’s proposed threshold of $32,000 would exclude up to two-thirds as many workers from guaranteed overtime protection as the current threshold. These excluded workers are far from the high-status employees originally envisioned by the administrative, executive, and professional exemption. For example, a two-person family taking home $32,000 cannot afford a basic standard of living anywhere in Maryland. Working additional hours with no additional pay effectively lowers a worker’s hourly wage and makes it harder for people to get ahead. Working more than the standard 40-hour workweek takes away time that the worker could use to hold a second job, take classes to advance in their career, or have time to care for their family. It makes sense that workers should be compensated for this time.

Overtime regulation comparison

Maryland policymakers do not have to sit idly by. Like many other states, Maryland has its own wage and hour laws. It should follow the lead of states like New York that have adopted strong overtime protections on their own. Updating overtime protections at the state level would both benefit working families and strengthen our economy by putting more money in consumers’ pockets. Furthermore, many businesses had already taken steps to comply with the federal rule when it was put on hold, meaning that they are well prepared to work within an improved state overtime law. Legislators introduced a bill to update Maryland’s standard during the General Assembly’s 2017 session, but the bill died in committee. Next year, legislators should act swiftly to ensure that modestly paid workers are fairly compensated for every hour they spend on the job.