Obama Overtime Rule Blocked by Court

Some ProfLeRoy readers are professional employees—e.g., teachers— if you have a degree requirement as part of your job. Others are executives— e.g., an owner or high-level manager of a business. Others are administrative employees—e.g., a bookkeeper. In 1949 Congress created these categories as exemptions for overtime pay. This means if an employee is an executive, administrative, or professional employee, there is no requirement to pay time-and-half for more than 40 hours per week.

Some employers misclassify employees to skirt overtime pay. Example: Manager of a fast food store. Example: the bookkeeper in an office. Example: LPN (nurses with lower skills and specialization). Example: Teacher Aide. Example: Shift Manager at a store or manufacturing plant. Plus many more.

Congress delegated power to the executive branch to define these categories precisely. Summarizing, here are three indicators of proper classification: the job requires advanced education; the job requires that the employee use discretion; the job requires the employee to use independent judgment.

Take the store manager. She has little discretion and independent judgment—but she often has a title that looks like it qualifies for an overtime exemption. She’s a “manager.” 
You’ll see her on Black Friday when she works 14 hours with no overtime pay.

To set the boundary more clearly, the Department of Labor uses an “income test.” Up to 2003, the income test was about $8,000 a year! Really? A professional, executive or manager would make what amounts to part-time income? No way, said the Bush administration. They tripled the income test to about $23,000. No problem with the courts. Twelve years later, the level was the same; so, the Obama administration raised the threshold to about $47,000.

A Texas court has blocked implementation of the rule.

Result: It’ll be easier for employers to pay no overtime to someone who makes more than $23,000 a year, if they have one of these fancy job titles. For a full-time employee, that threshold is about $12 an hour. Do you think that executives, administrative and professional employees are actually worth $12 an hour? If you answer “no,” this court ruling disagrees with your judgment. 

Postscript: Look at the map. The Obama administration was trying to grow that tiny corner at the bottom, which represents the 20% of the population that owns very little wealth in the U.S.