[Hey, PostEverything readers! As you read this, I’ll be doing the same, though aloud and in dulcet tones, to the members of the House Committee on Education and the Workforce. It’s the opening statement to testimony I’m giving this morning on the new overtime rule recently finalized by the Obama administration and the Department of Labor (DoL).
The rule, which as you’ll see will newly cover millions of workers with overtime protections, is under attack by House Republicans. No surprise there. But their angle in this hearing is that the rule will be burdensome to nonprofits and universities. This critique is largely misguided as the DoL — well, just read on for the details — there’s a lot of misunderstanding as to what’s really going on here.
I will say, and interestingly, this point comes out of the other witnesses’ testimony, that their problem appears to be less with the new rule, and more with tax cuts (note that Kansas U is represented) and budget cuts to nonprofits and higher ed. Such cuts are associated with the very Republicans who want to block the new rule. So what we have here is an argument that basically says we have to cut taxes on the wealthy so we can pay less to the middle-class when they work overtime. Your Congress at work, America.
Oh, and I should probably also note that the total amount of overtime pay the human resources guy testifying from the University of Kansas claims it will take to meet the new rule ($2.3 – $2.9 million) is less than they pay their basketball coach.]
Thank you for the opportunity to testify on this extremely welcome update to an essential labor standard.
My first point is that in our age of high levels of income and wealth inequality, it is essential that labor standards first established over 75 years ago in the Fair Labor Standards Act are updated. By adjusting the overtime salary threshold, this new rule does exactly that.
Second, as the blue line in the figure shows, this adjustment, while welcomed and significant, is a partial adjustment – one that reflects the DoL’s responsiveness to thousands of comments from stakeholders. Were we to fully adjust the threshold for the value it has lost since 1975, it would be set at well over $1,000 per week, instead of $913, which is the 40th percentile of the lowest wage region: the South. The new threshold will also cover 35 percent of full-time salaried workers, a large increase from the 7 percent covered today but a far cry from the 60 percent covered in 1975.
In other words, this new threshold is a reasonable but conservative choice. The U.S. economy is twice as productive as it was 40 years ago and the workforce is much more highly educated; I know of no plausible economic reason why our labor market cannot maintain a standard that approaches what we had back then.
Third, opposition to the new rule is misguided. Given the DoL’s thoughtful compromises in only partially updating this labor standard and the new rule’s negligible impact on the national wage bill, many of the attacks on it amount to nothing more than knee-jerk responses from business lobbyists doing what they’re paid to do: fight the rule regardless of the substantive arguments that support it. And while concerns about compliance costs and costs to nonprofits and higher educational institutions deserve a response, they too miss the mark.
On compliance costs, the DoL, at the behest of employers, did not change the “duties test,” which is the most complex part of the overtime determination. Since firms should already be in compliance with this part of the law, no new compliance costs are invoked in this area. In fact, at a recent congressional hearing, the witness representing the National Restaurant Association conceded this point, admitting that compliance with the new rule “…would be an easy transition to make from a management and bookkeeping standpoint.”
The higher threshold actually simplifies firms’ compliance burden. As more workers will be automatically covered, the need for the duties test on millions of salaried workers is now obviated.
The DoL has also worked hard to accommodate the concerns of nonprofits and higher education institutions. For certain Medicaid-funded providers of services for individuals with intellectual or developmental disabilities, for example, the new rule does not take effect for three years, providing time for outreach, technical assistance, and budget adjustments. As another example, DoL ensured that future National Research Service Award grants from the NIH will be above the new salary threshold.
It’s also important to note that the FLSA contains some exemptions for teachers – including professors, adjunct instructors, certain coaches and academic administrative personnel – as well as many graduate and undergraduate students. The DoL’s new guidance even highlights that the department generally “views graduate and undergraduate students who are engaged in research under a faculty member’s supervision… as being in an educational relationship [and not an employment relationship] with the school,” and thus not “entitled to overtime.” On the whole, the rule change is predicted to increase the total payroll of nonprofits and higher education institutions by far less than one-tenth of 1 percent.
Most importantly, these organizations should remember that the pay and work-family balance of their workers is no less important than the pay and work-family balance of workers at for-profit institutions. The whole point of this labor standard is to guarantee employees fair workplace conditions, a point recently amplified by a group of nonprofits in favor of the proposed rule, who wrote: “our own workers and the families they support also deserve fair compensation and greater economic security.” As these nonprofits argue, teaching or working for the public good should not require working long, unpaid hours.
While my fellow witnesses may argue otherwise, I urge you to remember that we could just as easily have found representatives of the education and nonprofit sectors who strongly support the new rule, recognizing its role in valuing and respecting their workforces. Those of us who purport to care about the public good have the responsibility to practice the values we preach. This rule change gives us an excellent opportunity to do that.