Today, the Obama administration and the U.S. Department of Labor releases a rule change to the FLSA that re-defines what a middle-class job means.
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.
The rule change that is being formally launched today 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 12-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 adjustment raises 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 overtime salary limit is based on the purchasing power of the U.S. dollar in 1975.
The Labor Department’s change is needed, appropriate, and overdue. 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.