Q:  I’m hearing in the news about the President pushing for salaried people to get overtime, which doesn’t make sense to me.  Why is this being proposed?

A:  This proposal means well and attempts to correct a wrong, but the way they’re going about it is unnecessarily confusing. You may have seen these headlines:

Obama Seeks to Expand Overtime Pay to Millions of Americans

Obama Proposes Shrinking White-Collar Exemptions

I wish the White House would call me before they create new initiatives and I could give them some advice on how to communicate more clearly with the public.

In my opinion, the problem is not that overtime laws need to be expanded. Or that “white collar” exemptions need to be shrunk, as the headlines indicate.  Those laws are fine the way they are.

The problem is that the minimum threshold for a salaried employee is so low ($455 a week or about $24,000 yr) that it creates a perverse incentive for employers to misclassify positions as “white-collar exempt” so they can have that person work unlimited hours a week, without any additional pay.

Do most employers take advantage of exempt employees by having them work 60-70 hours a week and pay them only $455?  Absolutely not.  In fact most employers pay their salaried employees well over this minimum.  But unfortunately, there are many other employers who do take advantage –especially in the retail, fast food and convenience store industries.

The minimum threshold has only been adjusted twice in the last 40 years.  That’s right. In 1975 it was $250 week, and in 2004, it was set to the current $455 a week.   If the 1975 number were adjusted for inflation it would be about $1,000 in today’s dollars.  Let that sink in.  How many employers do you think would engage in this “white-collar exempt” practice if they had to pay at least 52,000 a year? The perverse incentive would be removed.  What they might choose to do instead (and should have done all along) is to pay these employees on an hourly basis up to 40 hours. And if the business requires additional labor beyond 40 hours, they’d pay that same person overtime, or hire a part-timer and pay straight time.

So if the White House calls, what I would say is: forget overtime, forget modifying the standards, simply raise the minimum “white-collar exempt” threshold to adjusted 1975 levels.  Problem solved.

©Eva Del Rio