Correction: An earlier version of this editorial incorrectly reported the name of the Fair Labor Standards Act. This version has been corrected.
IF ALL had gone according to the Obama administration’s plans, 4.2 million middle-income workers would have gotten an early Christmas gift. Under a Labor Department regulation issued in May, they were scheduled to become eligible for overtime pay for hours worked beyond 40 per week, starting Dec. 1. Over the next decade, the total pay boost would have amounted to $12 billion. Walmart has already increased salaries for assistant managers by up to $3,500 a year in anticipation of the new rule.
But it almost certainly will not go into effect next month, due to a Nov. 22 ruling by Judge Amos Mazzant of a federal district court in Texas. The Fair Labor Standards Act, the ultimate source of authority for the national time-and-a-half standard, exempts “executive, administrative and professional employees” who earn a salary. The definition of such personnel has been a source of frequent contention since the law passed in 1938, though Congress intended both actual job duties and level of pay to be considered. The Obama Labor Department would have expanded overtime coverage by granting eligibility to people making up to $47,476 a year, more than double the current threshhold. This went far beyond Congress’s intent, Judge Mazzant reasoned, by creating “a de facto salary-only test.” Judge Mazzant’s opinion could be interpreted to mean that no salary criteria could be consistent with the statute — an extreme position, given that the existing standard was adopted under the Republican George W. Bush administration, though the judge in a footnote insisted his argument applied only to the Obama rule.
Clearly, federal law on overtime eligibility needs updating in view both of changes to the labor market since the last time it was modified a dozen years ago and of Judge Mazzant’s ruling. The likeliest place for that to happen is not in the federal courts, where an Obama administration appeal is unlikely to prosper, but in Congress — where Republicans have been gunning for the Obama administration rule. Not all are oblivious to the legitimate concerns it sought to address, however. Earlier this year, five GOP senators, led by Lamar Alexander (Tenn.), proposed phasing in the Labor Department’s higher salary threshhold over four years starting in 2017, with a possible opt-out for nonprofits and state governments, which have complained the Obama administration’s rule would be too costly for them. Certainly, if Congress imposed such a rule there could be no question of its legality.
Our concern is that lawmakers probably won’t go far enough. Like the minimum wage, the overtime rule tries to set a floor below which market forces cannot drive pay — to correct for the generally stronger bargaining position of employers. Given that this advantage is an essentially permanent fact of capitalist life, basic labor standards should be stable over the long term, so they aren’t constantly being renegotiated by politicians, relitigated by judges and bureaucrats or re-lobbied by unions, corporations and other interest groups. Any overtime rule Congress imposes should include mandatory periodic adjustments to account for new conditions, and specify criteria, including inflation and changes in the nature of work, thus keeping future surprises, for both workers and employers, to a minimum.