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Overtime Pay for More Workers

This article was written by in Career and Work. 10 comments.


Wages for the working class tie directly to the performance of the overall economy. When the largest group of consumers feels they have money to spend, they will do so. This spending may be to the detriment of their own quest for financial independence, but it also allows businesses to thrive. It’s always been the policy of more liberal politicians to encourage higher pay for low-wage workers, while it’s always been the policy of the more conservative to spur the economy by directly making it easier for businesses to profit.

Last year, President Obama called for an increase to the federal minimum wage, proposing first a gradual increase to $9 an hour, and later changing the proposal to increase to $10.10 an hour.

Another way to help workers in low-wage jobs is to ensure they are getting the overtime pay they’re entitled to. My first major job after graduating college was with a non-profit organization. It was a salaried position, but the salary was pretty low. It was enough so that I wouldn’t be considered living in poverty, but living expenses in New Jersey were, and continue to be, high. During most of the year, I worked eighty hours a week. It wasn’t always difficult work, but there was much to do and few people to do it. And everything was urgent.

At one point, I calculated how much I was getting paid per hour, and it was right around minimum wage. While that put me in a much better position than your average fast-food worker who also wasn’t paid for working overtime, it didn’t necessarily reflect the unique, specialized work I was doing. You make these kind of personal sacrifices when you’re working for a mission, but it’s not a situation that is right for a recent college graduate who sees financial stability as a goal.

Obama is asking the Labor Department to issue new rules pertaining to overtime, ensuring more people — though probably not those in the nonprofit sector — receive overtime pay. This could be even more effective than a minimum wage hike if the goal is getting more money into the hands of worker-consumers who might be able to use it to build wealth over time.

The most important factor in terms of overpay is ensuring companies are complying. If there are any companies breaking the law by withholding overtime pay, this needs to be addressed first. A group of McDonald’s workers have recently files a class-action lawsuit that claims that the company is avoiding paying employees full wages by using underhanded tactics, like not starting the clock until a customer enters the restaurant instead of when workers arrive to begin their day. Regardless of whether overtime is expanded, these incidents need to stop.

The usual reaction from the middle class to situations like that is, rather than encouraging businesses to adhere to the law, is to suggest those in bad working situations find a new job. Unfortunately, that’s not always a possibility. If a shift at McDonald’s is followed by a shift at a clothing store, and perhaps even a third job following that, all just to earn enough money to feed and shelter a family, it’s no surprise people can get stuck in low-wage jobs.

Obama’s new proposal would expand the requirement for overtime pay. Currently, employers can get around overtime laws by offering salaried workers more than $455 a week. That annual salary of $23,660 still falls beneath the poverty level, so there are people living in poverty who are not qualifying for overtime pay. Two states, California and New York, have set their own overtime exemption minimum at $600 per week. Raising this level can effectively raise the total wages for millions of workers.

It seems to me that most companies would want to attract the best employees, and one way to do that is to offer competitive compensation.

There was a revolving door of employment at that nonprofit organization where I worked. The organization would attract highly-motivated young people initially, but these same overachievers quickly found that their skills were in demand and that they had many more opportunities for personal growth elsewhere. In some cases, the labor market appreciated the same traits that made them great at their jobs in nonprofit, and compensated them appropriately, and in other cases, the individuals used their skills to build their own companies and enjoy the fruits of their own labor.

Small businesses tend to be unable to offer competitive compensation because profit margins tend to be tight. Many will look for other ways to attract the best employees, but non-monetary compensation can only go so far when you need to pay rent and buy food.

As regulations call for higher pay for low-wage workers, businesses will continue finding ways to avoid the increases. If McDonald’s is finding ways to shave hours off employees’ time cards, you can be sure other low-wage employers are doing the same.

Published or updated March 13, 2014. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar LaTisha

First off…why did you have to use that plate of fries as the picture?! Now I must go find fries and eat them all.

Back to the article, my coworkers and I were just discussing this at lunch today. I don’t know that it would affect me because I have a feeling that if my company thought they had to pay extra for the 60+ hours a week they would find a way around it. Not that I work for a terrible company but at the end of the day it is a business and not a government organization. Our purpose is to make a profit and the employees are compensated to get the job done. If that means more hours or weekends then that is what it means.

I wonder if this will actually gain any traction.

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avatar Kathy

A great many people who are salaried instead of hourly workers are educated and quite capable of negotiating their employment contract. Obama is inserting the government into private business negotiations. If an employee is so valuable to a company that they must work 60 hours, they would be equally valuable to another company that will compensate them more fairly. I can almost guarantee you that companies will now forbid employees from working overtime. Additionally, I suspect that most hourly (not salaried) employees do get paid for the overtime hours they work. They just don’t get time and a half. This ruling will now have the same effect as his minimum wage mandate. It will reduce the number of people getting jobs and now working overtime.

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avatar jim

Kathy said : “I suspect that most hourly (not salaried) employees do get paid for the overtime hours they work. They just don’t get time and a half.”

Legally anyone who is hourly is already required to be paid overtime and the law mandates overtime is 1.5 or more.

That is already the law… The Fair Labor Standards Act was first passed in 1938 and first required overtime pay.

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avatar jim

I should point out that there are many exemptions to overtime laws for various industries. so “anyone who is hourly” doesn’t necessarily get OT since there are the exemptions.

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avatar jim

Kathy says: “I can almost guarantee you that companies will now forbid employees from working overtime.”

Actually the employees in question would like that. That really won’t hurt the people in question. In fact it will mean working fewer hours for the same pay. So for the people who are salary with low wages working 50-60 hours I”m sure they’d love to not have to work more than 40 hr.

From what I gather the rules change is really only targeted at people who make pretty low incomes and have very little supervisory duties yet are treated as exempt and get no overtime pay and often work over 40 hrs. They are salary so if they work 40 or 50 or 60 hrs the pay is the same and no overtime. The rule change would now consider these people eligible for overtime pay for anything over 40 hrs.

It won’t take compensated hours away from anyone.
It will take away uncompensated hours or force the employers to pay overtime for people they already work over 40 hrs for free.

Nothing in the law is saying it would make business give people overtime work if they already only work 40 hrs. It only applies to salary people and only those with lower income levels. They have’t defined the income threshold. Right now its at $455 a week but the idea is to increase that.

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avatar Marie @ My Personal Finance Journey

Why did you put a picture on fries on your article? Anyways, many companies now would offer big salary for the workers when they work overtime. Yes it’s beneficial but I don’t think it is good for their physical asset.

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avatar Luke Landes ♦127,500 (Platinum)

The bit about McDonald’s reminded me of french fries.

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avatar Donna Freedman ♦90 (Newbie)

A close friend is a salaried journalist. He worked three weekends in a row (anywhere from 8 to 16 hours) in addition to working the regular five-day week.
The three-in-a-row was unusual, but never does a week go by without his staying an hour past quitting time and/or putting in a few hours of evenings/weekend work. I remember this well from my own newspapering days: You’ve got a lot to do and eight hours won’t always cut it, especially if the only time you can interview someone is at 8 a.m. Saturday or if the play rehearsal starts at 7 p.m.
“Come in a little later that day,” you’re told — but if you do that, you might not get everything done.
I expect this is true of other jobs, too. A relative of mine who’s a health care provider starts her days at 8 a.m. and often doesn’t get lunch until almost 2 p.m. — when she gets it at all. If she takes her half-hour, that might mean she’ll still be doing chart notes at 5:30 p.m. Her salary is for eight hours, incidentally, not nine and a half. It’s good pay but this busy-every-second schedule, with scarcely a moment for a bathroom break (let alone her legally mandated lunch break) does take a toll.

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avatar Donna Freedman ♦90 (Newbie)

Sorry, I hit “submit” before I finished my thought. If the employers were required to pay overtime, the newspaper probably would just enforce the eight-hour day and coverage would suffer (although the writers would get a break).
If the health care employer were required to hire more people like my relative, she’d make less money but that’s just too darned bad. As it stands now, she makes a bundle by exploiting people (the workers are super-stressed). She’d make less of a bundle if she followed even the current laws (e.g., lunch breaks being observed and salaried folks clocking out on time).
Employers need to treat workers fairly.

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avatar jim

Donna, if their salaries are “good” then it is unlikely the changes to OT would impact either of them. If they make over $50k its almost a given they won’t be touched.

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