More Work, Less Overtime: 5-4 Supreme Court Vote Hurts Middle Class

You may soon lose your overtime pay if you are a nurse, office manager, salesperson, construction supervisor, health care office worker, and similar. That is the upshot of the Supreme Court’s ruling this week in a case involving “service advisors” at auto dealers (the people who check your car in). These workers argued that they were legally entitled to overtime pay under the Fair Labor Standards Act (the nation’s wage and hour law). In its 5-4 ruling in Encino Motorcars v. Navarro, the high court ruled that these employees are “exempt” from overtime laws.

So what, you say? The problem is how the majority wrote its opinion. They swept away 60 years of precedent stating that “exemptions” are to be narrowly interpreted. 

So now employers may broadly interpret “exempt” employees.

Let’s break this down with two illustrations. 

Nurses usually are classified as hourly employees. Now, however, if a nurse supervises several others, she or he may classified as an “executive” because this element must “have a primary duty of managing the enterprise or a department or subdivision of the enterprise; must customarily and regularly direct the work of at least two employees. Before this court ruling, that was laughable—but the Court has now said that these terms can be interpreted broadly.

So, broadly speaking, some nurses are “executives” because they “supervise at least two employees.”

That nurse might be paid $20, with ten hours of overtime most weeks. The nurse would earn an additional 150% of $20 per hour, or $30/hour (increasing her weekly pay by $300).

Now, her employer can reclassify job as “exempt” from overtime, assign the extra hours, and not pay anything extra in overtime.

Let’s do the same math but now use an office manager. She doesn’t supervise anyone, but she might be reclassified under the “administrative” exemption. Here’s the test for her: “employees must have a primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and their primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.” I have italicized “discretion and independent judgment” because most office managers are given fairly concrete guidelines for managing work flow. But, if the test is now to be broadly construed, she is much more likely to be reclassified as an employee who is exempt from overtime.

Let’s close with some numbers: According to Department of Labor statistics for 2017, 80.4 million workers age 16 and older in the United States were paid at hourly rates, representing 58.3 percent of all wage and salary workers. Among those paid by the hour, 542,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.3 million had wages below the federal minimum.

How many of these people will now lose overtime? It’s anyone’s guess—but given the novel, biased, and ideologically-driven way that Justice Clarence Thomas wrote the opinion, the number will probably be substantial. Justice Gorsuch joined the majority, adding to more "winning" as America becomes "great again."

The less that people are paid overtime, the more America’s vanishing middle class will shrink.