The federal Fair Labor Standards Act (FLSA) was passed in 1929 and has ensured minimum wages and required overtime payment (150% of regular pay rate) for hours worked over 40 in a workweek. The Act was intended to create wage protections for American workers, create more jobs, and protect the middle class. All three of those goals remain as relevant to the middle-class today as they were in 1929.
This week, the U.S. Department of Labor announced proposed changes to the FLSA that would re-define what a middle-class job means.
Specifically, the proposed rule targets exemptions. In general, the FLSA applies to non-salaried employees. Salaried employees who meet specific job criteria, such as executives, high-level management, or professionals, and who earn a minimum amount annually, are exempt and employers do not have to pay them overtime. The annual minimum amount is currently $455 per week or $23,660 annually.
The $455 threshold is a problem because it has not been adjusted for inflation since 2004. In many situations, the workers classified as executives, high-level management, or professionals are actually managing people who themselves are making more than $23,660 annually.
The ten-year-old old figure allows employers to legally pay executives, high-level management, and trained professionals a salary less than $24,000 and avoids the increased expense of overtime compensation. As President Obama said in an op-ed article in The Huffington Post, “Right now, too many Americans are working long days for less pay than they deserve.”
The Labor Department’s proposal calls for raising that salary level to a figure equal to the 40th percentile of weekly earnings for full-time, salaried workers – projected to be $970 per week or $50,440 annually – by 2016. The new proposed overtime salary limit is based on the purchasing power of the U.S. dollar in 1975.
The Labor Department’s proposed change is needed and appropriate. Workers earning less than $50,440 are neither rich nor highly compensated individuals. They are performing the entry-level and middle-class jobs that Congress intended to protect by passing the FLSA.