Proposed changes to overtime rules would cut wages for up to 32,000 Mainers

A bill before the Maine Legislature would cut wages for roughly 19,000 Mainers this year. It would do so by changing the state’s overtime rules to exclude more working-class Mainers from eligibility for time-and-a-half pay. By 2022, the bill would result in roughly 32,000 workers losing their ability to earn overtime based on MECEP analysis.

Specifically, the bill, LD 1769, would repeal state-level overtime rules and revert Maine’s standards to the less worker-friendly ones in place at the federal level. The bill is sponsored by Sen. Amy Volk, R-Scarborough, the Senate Chair of the Legislature’s Labor Committee. MECEP testified against the bill at a public hearing before Sen. Volk’s committee on February 1.

Federal overtime rules do not adequately protect workers

Overtime protection stems from the adoption of the 40-hour work week, a provision of the Fair Labor Standards Act, or FLSA, adopted by Congress in 1938. Like much of the FLSA, overtime protection recognizes the inherent dignity of work by guaranteeing that employees who go above and beyond the standard 40-hour work week are fairly compensated for their hard work.

Under FLSA, an employer had to prove two things to exempt an employee from overtime pay: First, they have to pay the worker more than a federally mandated wage threshold, currently set at $23,660. Second, they have to show that the employee has substantial  “bona fide executive, administrative, or professional” responsibilities in their job description. This duties-based test, along with the salary test, was designed to ensure that only the most senior employees in a business – those who earned a good wage whose jobs could be expected to demand long hours as part of their regular duties – were exempt from the right to overtime pay.

Federal overtime rules in their current form are outdated and do not adequately protect workers. For example, overtime regulations were not updated for four decades, between 1976 and 2004. During that period, employers found more and more loopholes to exploit. In 2004, the US Department of Labor did update the rules, but with the effect of actually making it easier to exempt middle-wage employees from overtime protections. The duties-based test was amended so that nearly all workers above the salary threshold would be classified as exempt from overtime pay. However, the salary test was never updated for inflation, between 1976 and 2004, and was barely adjusted in 2004.

So, 40 years of increased cost of living and higher wage levels meant that the salary threshold did not keep pace. The outdated salary threshold combined with a less rigorous duties-based test reflected an erosion of the original intent of the FLSA and meant that a smaller share of workers derived any benefit from overtime protections.

The outdatedness of these rules, and the resulting erosion of protection of workers meant that hundreds of thousands of American workers, the majority of them in the middle class, were made to work long hours without extra pay. Today, hosts of low- and middle-income workers without any real executive responsibilities are denied the right to overtime pay. Indeed, some companies require their workers to work more than 40 hours a week without the benefit of time-and-half compensation for their hard work.

Maine should not weaken current state-level overtime protections by adopting federal provisions

States have the right to set their own salary thresholds higher than the bar set by the federal government. For years, Maine has tied its overtime salary threshold to the minimum wage with a calculation designed to ensure workers are adequately protected from unfairly low compensation. When Maine’s minimum wage goes up, so does its threshold for overtime pay. In 2017, when Mainers increased the minimum wage from $7.50 to $9 per hour, the resulting increase in the overtime threshold — from the federal rate of $23,660 per year* to the new rate of $27,000 per year — provided overtime pay to an additional 10,000 Maine workers.

This year, when the minimum wage increased to $10 per hour, the overtime threshold grew to $30,000 per year. That increase made another 9,000 Maine workers eligible for overtime pay. As the voter-approved minimum wage law continues to increase the minimum wage by $1 per hour until it reaches $12 in 2020, the salary threshold for overtime is schedule to increase by about $3,000 per year to keep pace.

The logic behind Maine’s law is simple: The minimum wage (also established by the FLSA) is meant to protect low-wage workers from unfairly low wages in the same way that overtime protections are meant to protect working- and middle-class employees from being under compensated for long hours. So as minimum wage increases, providing raises for low-income workers, so too should the threshold for overtime increase to similarly allow middle-class families to keep up with the cost of living.

Sen. Volk’s bill, LD 1769, would eliminate the provision of Maine law that ties the salary threshold for overtime to the minimum wage. In so doing, it would revert the state’s overtime threshold back to the federal level of $23,660 — cutting off eligibility for overtime pay for nearly every worker who earns more than that relatively low annual salary.

In 1977, fewer than one in eight Maine employees earned enough to be exempt under the salary threshold. Today, 98 percent of salaried employees in Maine, make more than the federal overtime threshold of $23,660, and are at risk of being classified as “exempt” if Sen. Volk’s bill becomes law.

Put simply, this bill would cut wages for thousands of Mainers, who by definition are among the hardest workers in our economy. Mainers are known as hard workers, but they also value fairness, and they deserve to be paid properly for their time on the job. That’s why MECEP opposes LD 1769.

* In 2016, after careful study, the U.S. Department of Labor under President Barack Obama adopted new rules to update the salary threshold for overtime, roughly doubling it, and the description of duties that could make an employee exempt from overtime protection. President Donald Trump’s administration has effectively reversed that decision, but that’s no reason for Maine to move backwards as well.