Presidential Expansion of Overtime Pay

March 17, 2014

In his weekly radio address and Presidential Memorandum President Barack Obama has proposed taking a great step forward and modernizing the test for applying so-called “white collar” exemptions. The “white collar” reference is a misnomer because employers can get away with denying overtime wages to workers they call “executive” or “management” employees, even though their annual pay is less than $24,000 a year. That doesn’t sound very “white collar.” The reality is that many such workers who are classified as management or administrative executives are actually spending the majority of their time performing manual labor.

For example, retail store “managers” who may run your local drug or dollar stores often function as managers only a small fraction of their working hours. Most of the time they run cash registers, stock shelves, clean the floors, count inventory, and unload trucks. However, because, they are overall “in-charge” of the store, employers classify them as exempt. Then, because these workers represent a form of cheap labor, they work them 60 or 70 hours a week and do not need to hire assistant managers or line employees. See, e.g., Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008). In the Family Dollar store, the employer lost their exemption because of the detailed facts weighed slightly more in favor of the employees than the employer. While it was an expensive loss for Family Dollar, this represents the exception and not the rule. The vast majority of workers who earn the minimum salary to qualify for the exemption do not receive overtime compensation despite their relatively unskilled positions.

The reason employers are able to take advantage of employees under the existing rules is because that one component of the test of determining if a worker in an executive is that he or she earn a salary of at least $455 per week. That’s equal to just $23,660, hardly an executive’s level of pay. Hopefully, some balance can be restored to overtime pay for these workers. Highly compensated executives (yes, real executives) are earning more than ever and in amounts that are severely disproportionate to their subordinates. According to MSN Money, “the ratio of CEO-to-worker pay has increased 1,000% since 1950. Today’s Fortune 500 CEOs make 204 times more than regular workers on average ….” CEO Pay Is More Out of Whack than Ever. We must return balance to the American worker in the form of overtime compensation.

For over 40 years, Parks, Chesin & Walbert has fought hard for worker rights, especially to obtain proper overtime compensation for employees. Call us for a free evaluation today.