What will an updated overtime rule mean for millions of workers?

Tomorrow, the Vice President is expected to announce the U.S. Department of Labor’s issuance of the final rule on overtime for salaried employees. Rumor has it that the rule will guarantee overtime pay to anyone working more than 40 hours in a week if their salary is less than $47,500 a year or $913 a week. That is less than DOL proposed last year, but still a very significant increase that will mean millions of employees will get raises or have their weekly hours scaled back to a more humane level. About 12.5 million employees will either be newly entitled to overtime pay or will have their rights strengthened so that they don’t have to rely on a complicated analysis of their job duties to determine that they have a right to time and a half for their overtime hours.

Reporters and Hill staffers wonder who are the people who will get raises, a question that is both easy to answer and difficult. The easy part is that employees earning close to, but less than, the new threshold will get raises if they typically work overtime.  It will be cheaper and easier for the employer just to give them a raise of a couple of thousand dollars than to track their hours and pay them time and a half.

An obvious example is postdoctoral researchers, who typically earn $42,000 to $45,000, who work 50 to 60 hours a week, or more, conducting critical cancer and other biomedical research, physics, chemistry, biology, or math research. Paying them overtime for their normal, excessive workweek would be so expensive that their universities will give them a raise above the threshold in order to avoid it. The result will not just be better-rewarded researchers, but less turnover and stronger commitments to work that might benefit the entire nation and even the world.

In the comments it submitted for the rule-making record, the American Bankers Association provided good examples of employees in its industry who will benefit. The Bankers testified that banks commonly have various managers, including check processing managers, branch managers, IT managers, credit analysts, and compliance officers, who are currently treated as exempt and are denied overtime pay. But in many areas, their median salaries are fairly low: $45,400 for branch managers in Akron, Ohio and $46,300 in El Paso, Texas. Check Processing Managers in Little Rock, Arkansas earn a median salary of $45,800 while they earn a median $45,200 in Brownsville, Texas. It’s likely that their employers will give them all raises if they currently work even four or five hours of overtime a week.

It gets more difficult to predict when the salaries are lower. Will a university that pays its postdocs an exploitative $38,000 a year give them a raise above the new threshold? It probably depends on whether the postdocs are working more than 50 hours a week, at which point it’s cheaper to pay the threshold salary for exemption than to pay for each hour of overtime at 1.5 times the regular rate of pay.

Many reporters have told me that they are paid less than the salary threshold but are treated as exempt and denied any overtime pay. Reporters in high-cost areas such as New York, Washington, DC, or Boston are almost certainly going to receive salary increases, unless their pay is atypically low. I imagine that even in the South, many reporters are paid enough (and their hours are long enough) that a salary increase will be cheaper for their employer than paying overtime.

They probably won’t all get salary increases, but 2.6 million salaried employees covered by the Fair Labor Standards Act earn between $23,660 and $47,500. If they work substantial amounts of overtime now, they have a good chance that their salaries will be raised above the new exemption threshold.