Building an Economy that Works for Everyone

New WA state rule on overtime pay can help fix income inequality


Photo: Overtime (Lena Vasiljeva, Flickr Creative Commons)

Two weeks ago the people of our state voted to raise the minimum wage to $11 an hour in 2017, and eventually $13.50 in 2020. It’s an important step forward — but just one step. And thanks to a judge in Texas, Washington has some more work to do.

Strong as it is, our state’s new minimum wage law doesn’t do much for people slightly higher up in the wage structure: those with household incomes above poverty, but whose incomes and prospects have been stagnant for at least a decade.

Take, for example, a family exactly in the middle of the middle class. In 2007 they would have had about $65,000 in income. In 2015 they would have had … $65,000. No change – except that college tuition, health care, child care (to name a few necessities), have all increased in price. A family at the 30th percentile — meaning 30 percent of families make less money and 70 percent of families make more — actually has less income in 2015 than they did in 2007.

For 232,000 of these workers in our state, the Grinch who stole Christmas came early this year. He took the form of a judge in Texas. This judge saw fit to overrule a new regulation from the U.S. Department of Labor that would have provided overtime pay to millions of lower wage workers.

These workers, classified by their employers as “exempt” staff, get paid a salary instead of a wage. Through this administrative sleight of hand, an employer can avoid paying overtime, leaving the employee with the same salary no matter how many hours she or he works.

To be labeled “exempt,” a worker must help manage operations and exercise “independent judgment with respect to matters of significance.” An employer can pretty easily skate around these definitions to consign, for example, a shift manager to an exempt position with no overtime and a lousy salary, as long as that manager is earning more than $455 a week, about $23,660 a year.

That salary threshold, established years ago by the Department of Labor, hasn’t kept up with inflation or productivity increases over the past 30 years. It’s one of the reasons why middle income households haven’t seen any real economic improvement for so long.

To remedy this abuse, President Obama directed the Department of Labor to review this standard. After months of study, the Department of Labor announced a new income threshold of $47,476 a year, or $913 a week, to qualify as an exempt employee.

In Washington state, 232,000 workers, about 1 out of every 15, would have benefited from the new regulation. And it was all supposed to happen tomorrow. But a federal judge in Texas wiped out the regulation before it could be implemented.

Most likely, President-elect Trump, who says he wants to help hard working middle class Americans, will just let the new rule die. Exempt workers in our state will together lose over $400 million each year that would have been added to their incomes — money that would have helped them pay for their necessities and gone directly into our economy, stimulating consumption and employment.

It doesn’t have to be this way. Washington state legislators don’t have to let employers keep taking advantage of workers.

California and New York have already put in place their own standards for exempt workers — and we could do the same.

In California, the threshold for exempt workers is $41,600. In other words, below that, whether you are deemed a manager or not, if you work more than 40 hours a week, you get time and a half for overtime. That would be a big improvement for exempt workers in our state.

All it takes is a state law. We did that for the minimum wage, through an initiative to the people. It’s time for the Legislature to step up to the plate and enact a new threshold for workers who earn a little more than the minimum wage.

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