Outdated overtime rules costing ‘salaried’ workers billions

Washington state’s outdated overtime pay standards are estimated to cost workers $4.2 billion each year in lost wages and time.

(Oct. 1, 2018) — Time is money, and employers in Washington state are taking both — to the tune of $4 billion worth from salaried workers this year alone. That startling figure represents the value of the time lost by salaried workers who have been working more and more hours without getting paid for it, according to a new analysis by Working Washington.

“That’s because our state’s overtime rules have fallen so far behind the times that employers can get away with not paying workers an extra dime when they work extra hours over 40 a week,” reports the group. “As long as they classify the workers as ‘exempt’ from overtime and pay them a salary of just $24,000 per year. When employers don’t have to pay for employees’ time, that time usually gets treated like it doesn’t count.”

TAKE A STAND — The Washington State Department of Labor and Industries is in the midst of reviewing the state’s outdated overtime pay rules, and Working Washington, the Washington State Labor Council and community allies are calling on L&I to update their rules. Working Washington is asking L&I to ensure that anyone paid less than triple the state minimum wage (about $75,000/year) gets time-and-a-half pay when they work more than 40 hours a week. This is about how it worked when the rules were last updated in the mid-1970s, adjusted for changes in the minimum wage, when about 62 percent of salaried workers got overtime pay when they worked over 40 hours a week. Now, only about 8 percent do.

Restoring overtime protections and returning this $4.2 billion of time and money to Washington’s salaried workers will boost productivity, expand opportunity, and help workers bring their jobs, lives, and families back into balance. To the extent that restoring overtime rights raises the take-home pay of salaried workers, we know from experience with minimum wage increases that this money goes right back into the economy. And to the extent that restoring overtime rights means less time at work for salaried workers, that translates to more parents who have time for their children, more neighbors who have time for their communities, and more people who have time to pursue their dreams.

How $4.2 billion in lost time and money was calculated

Here’s how Working Washington reached that estimate:

● Salaried employees in the U.S. report working an average of 49 hours a week. But if you’re overtime-exempt, you don’t get paid at all for hours after 40. (Source: Gallup)

● If paid at time-and-a-half, those 9 extra hours of work would be worth a 34 percent premium on top of a salaried worker’s full-time pay for 40 hours. Nine hours at time-and-a-half is the equivalent of 13.5 hours at straight time, which represents an additional 34 percent over 40 hours.

● Working Washington, along with the Washington State Labor Council, AFL-CIO, and several other labor and community groups, are calling on the state to update the rules to ensure that anyone paid less than about $75,000 a year gets time-and-a-half pay when they work more than 40 hours a week, which about how it worked when the rules were last updated in the mid-1970s, adjusted for changes in the wage market of course. (Historic data has been compiled on the L&I website; the threshold for overtime exemption 1975 was $250/week, approximately triple the minimum wage at the time. At that time, more than 60% of salaried workers got overtime when they worked extra hours over 40 in a week.)

● The average affected worker is paid halfway between $24,000 and $75,000, or about $50,000 a year. Applying the 34% figure of lost time and money to that $50,000 salary adds up to $16,875 a year in time and money taken from the average affected worked without compensation.

● A recent data review suggests that there are approximately 250,000 salaried workers in our state affected by our out-of-date overtime threshold. (Source: The Economic Policy Institute has found that about 234,000 salaried workers in Washington are paid less than $49,000 a year. Obviously there are substantially more workers than that paid less than $75,000, but no solid estimate is available for the number of salaried workers paid below the figure, so Working Washington chose to work with this extremely conservative approximation.)

● The average loss of $16,785 of time and money a year for each of 250,000+ workers adds up to $4.2 billion in time and money taken from salaried workers in our state each year by employers that take advantage of our out-of-date overtime exemptions.

“While this long overdue update to overtime rules would have a huge impact on workers’ lives,” Working Washington reports, “We do not anticipate that employers would actually put $4.2 billion more into their payrolls. Rather, a huge portion would be returned to workers in the form of time they’d have to live their lives instead of spending it at work. Because once workers’ time has a price again, employers will take less of it.”

The group has collected numerous accounts from workers about how endless hours and low pay affect the jobs, families, and lives of salaried workers in retail, food service, offices, nonprofits, and other jobs. Several are posted online on its website.

Working Washington is a statewide workers organization that fights to raise wages, improve labor standards, and change the conversation about wealth, inequality, and the value of work.

Previously at The Stand — Our state must restore workers’ access to overtime pay