Not Just Nine to Five – The Ethics Surrounding Overtime Pay

  • December 28, 2016

 

President Obama has pushed to get more workers eligible under the overtime rules. The Fair Labor Standards Act has adjusted the salary and compensation levels needed for employers to be exempt from paying overtime. The adjustments were significant, jumping from $455 to $913 per week (or $23,660 to $47,476 per year) as the bottom threshold for an exemption. In other words, since 2014, employers paying workers less than $455 per week were not exempt from paying overtime; under the adjustments, employers paying between $455 and $913 per week will no longer be exempt. Employers who pay workers above these threshold levels are exempt from paying overtime, if they classify their workers as executive, administrative, or professional employees. The United States Department of Labor estimates that over four million more workers will now be eligible for overtime pay.

As noted in a previous piece, Japanese companies are notorious for inducing or coercing their white-collar workers to put in extremely long hours of work. The karoshiphenomenon has been linked to heart attacks and suicides. There is a mystery surrounding this phenomenon, however. About a hundred years ago, steelworkers in America were putting in twelve-hour days, five or six days per week. Working in a steel foundry has to be physically more onerous than sitting at a desk, although the comparative emotional and mental effects of the two occupations remains unclear. Although accident rates in steel mills were much higher than what today’s white-collar workers face, the steel industry fought a reduction in daily or weekly hours.

Many of the steelworkers also opposed a reduction in weekly hours. Most of the workers who opposed shorter hours were recent immigrants. They desired to make as much money as possible in as short a period as possible. Many of these workers were young men, more capable of enduring the lengthy hours and unpleasant conditions. Perhaps they hoped to amass a nest egg to take back with them to the old country, or maybe they hoped to have enough to start a small business.

The Japanese workers dying from heart attacks might have been susceptible to such from the mere fact that their jobs were sedentary, as working sixty hours a week does not leave much time for exercise. Japanese men also appear to have a greater incidence of smoking than do American men.

The basic idea is that before the change in the Fair Labor Standards Act, someone employed as a manager of a fast foods place, for instance, making $24,960 per year would not be eligible for overtime. Suppose this worker is being paid for full-time work (2,080 hours a year for forty-hour workweeks). This would be $12 per hour; if the expectation is that this manager puts in ten extra hours per week, they would be making the equivalent of $9.60 per hour.

National chains of restaurants or fancier sit-down venues paying their managers in excess of $24 an hour (these firms’ workers are currently not eligible for overtime) might have favored the revised law, as it could force “Mom & Pop” restaurants to pay much more to their managers, possibly so much more that they either have to cut back on staff or close their doors. The small business owners, therefore, would seem to be at greater risk.

There is a possibility, although a slender one, that many small restaurant owners would like to pay overtime, but cannot because of competitiveness issues. If they pay their workers more and, therefore, have to raise their prices, they might become uncompetitive, if similar rivals did not match the pay raise. If all of the restaurants had to pay overtime, then such owners would no longer face adverse competitive issues.

Another curious aspect is the higher threshold for the overtime coverage to kick back in: $134,004 as opposed to $100,000. Why white-collar workers between the two exemption thresholds may not be eligible for overtime is odd. If it is deemed right and salutary that some white-collar employees must be paid overtime, what is the ethical argument for precluding other white-collar workers from being paid overtime? What is the justification for mandating overtime pay for skilled labor and not for white-collar workers? These are interesting ethical questions that underlie the legislation.

The thresholds are likely to trigger some odd behavior. Presumably some employers might be willing to pay a little more in salary to boost a white-collar worker into the exempt range, in order to avoid paying overtime.

The change in the current law is not the end of this issue. We’ll see what happens under a new administration. The new administration may revert back to the old thresholds.

The views and opinions expressed are those of the author and do not imply endorsement by UNIBusiness or the University of Northern Iowa.

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President Obama has pushed to get more workers eligible under the overtime rules.

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