Welcome to the Working Week-and-a-Half

A new federal provision mandating overtime pay for a new pool of salaried employees goes into effect in December. What does it mean, and how long will it last?

Illustration by Jason Stout

If you make less than $47,000 annually, it might be time to ask your employer for a raise. For the first time in more than a decade, it may be in your boss' best financial interest to listen.

That's because a new federal overtime rule is set to go into effect Dec. 1 that will make it much harder for employers to deny workers overtime pay if they work more than 40 hours in a week. Currently, salaried workers who make more than $23,660 have been exempt from mandatory overtime wages if their employers classify them as having some type of managerial role.

That threshold means that broad swaths of the country's working- and middle-class labor force – often low-level managers in the service sector – can be made to work very long hours for very low pay. If you're working 40 hours per week, $23,660 translates to $11.38 per hour. If you're working 50 hours per week, it translates to just a smidgen over $9 per hour. Work an even longer workweek and the numbers start getting really ugly, especially if you're trying to get by in a place like Austin. As Vice President Joe Biden explained when he announced the new rule back in May, 62% of American workers were eligible for overtime in 1972, compared to only 7% today.

“This is one of the biggest actions [Obama] can take to improve wage stagnation for workers.” – Austin City Council Member Greg Casar

Under the new rule, a set of provisions contained within the Fair Labor Standards Act, the current threshold for how much a salaried employee must make in order to be considered ineligible for overtime compensation is set to more than double. Anybody making less than $47,476 stands to benefit from the provisional changes. The rule also states that the threshold will be automatically adjusted every three years. The aim is for the provision to always align with the 40th percentile of salaries in the lowest-income region in the country, currently its South region. The new rule is a little-noticed but potentially significant part of President Barack Obama's economic legacy.

"This is one of the biggest actions he can take to improve wage stagnation for workers," said Austin City Council Member Greg Casar, an outspoken workers' rights advocate who suggested the change was one of the few significant moves Obama could make on the labor front "because of gridlock and obstruction in Congress."

Others, as one might expect, have a different take on the issue. Twenty-one states, including Texas, are teaming up in a lawsuit against the Department of Labor over the rule. Together, they're alleging that the administration overstepped its authority by raising the threshold so dramatically, and that the new rule does not take into account the differences in the cost of living by region. The U.S. Chamber of Commerce, a powerful lobby group for big businesses, filed a separate suit. "Once again, President Obama is trying to unilaterally rewrite the law," legally embattled Texas Attorney General Ken Paxton said in a September statement. "And this time, it may lead to disastrous consequences for our economy."

Immediate Impact

Not everybody who spoke with the Chronicle for this story would classify the consequences as "disastrous." Natalie Earhart, general manager of the Galaxy Cafe on West Lynn, one of six restaurants run by the three principals of the locally owned Intergalactic Productions, described implementation of the provision as "really easy." The Intergalactic group opted to shift all salaried employees making under the new threshold into hourly roles, a change that Earhart described as an easy way to ensure that the company is consistently tracking the hours of any employees who might be due overtime. Supervisors who were previously salaried and subject to unlimited hours will now be punching in like other waiters and kitchen staff.

Part of the reason it's not causing Inter­gal­actic owners or Earhart major stress is that the company is not in the habit of making its employees work long hours. "We will try to limit the amount of overtime if possible," she said. "But if it just so happens that we need one of our previously salaried employees to work 10 hours' overtime and they're up for it ... they have the opportunity to make a little more money than they currently make." Earhart said nobody at Galaxy is getting their hours cut, and all full-time employees will maintain their current benefits. Earhart described IP owners as progressive types who, from both a personal and business perspective, believe in decently compensating their workers.

Natalie Earhart of Galaxy Cafe described implementation of the provision as “really easy” (Photo by John Anderson)

While salaried workers at Galaxy already have paid vacation, as hourly employees it will be easier for them to take unpaid time off if they want or need to, said Earhart.

Few local employers who spoke with the Chronicle seem to believe the new rule will prove their ruin, but there are nevertheless plenty who view it as a challenge. And how they respond to that challenge might not always work to the benefit of their employees. "Some people are telling me they're going to employ more part-time employees so they don't have to pay overtime," said Susan Burton, an employment attorney whose clients are largely small businesses and local nonprofits. Burton said employers aren't caught off guard so much by the threshold being raised, but rather because it was suddenly raised so dramatically. "People would have preferred to see it come in incrementally," she said.

Plenty of employers won't be affected by the change at all, either because most of their workers are already hourly, and/or all their salaried employees earn more than the new threshold. John Kunz, who owns Waterloo Records, said most of his employees are hourly and that he only needs employees to go overtime in special circumstances, like during South by Southwest or Austin City Limits. Kevin Schlondrop, a manager at Z'Tejas, said that the Tex-Mex restaurant on West Sixth Street will hardly be affected by the change. Most of the restaurant workers are hourly – and thus entitled to overtime pay no matter what – and the salaried managerial employees typically make above the new threshold. In general, Schlondrop said, the company that owns the restaurant, Cornbread Ventures, discourages overtime, saying that Z'Tejas "tries to limit overtime altogether."

A representative for Whole Foods said that the national chain expects only 65 of its more than 84,000 employees to be impacted by the change.

More Money For More Time (Or Maybe Neither)

There was certainly evidence of workers who will benefit from the change, however. Stephen Petersen, a salaried manager at the Austin Java by City Hall, was vaguely aware that overtime rules were changing but did not realize how specifically it applied to him. "I almost always work more than 40 hours a week," he said. Asked whether he'd prefer more leisure time or more money, Petersen laughed: "I don't know, probably more money." Robert Campbell, manager of Clark's Oyster Bar on West Sixth, was also surprised to learn the news. "Everybody else who is salaried, we work 50 to 60 hours a week," he said. Neither company would disclose to the Chronicle any internal plans or preparations it has made to keep employees abreast of any changes they should expect concerning their paychecks or the amount of time they'll work.

If there is one group that appears to be uniquely impacted by the change, it's local nonprofits. Many charitable organizations are staffed largely by white-collar employees who work long hours for modest salaries. Andy Miller, president and CEO of Any Baby Can, a group that helps pregnant women and new parents face the challenges of parenting, said the new rule will be "more of a cultural and administrative shift for us than a true financial burden." Like many other employers, he said that they're going to try to prevent the group's nearly 100 employees from going overtime as much as possible, but that the nature of the work the nonprofit does makes hours unpredictable. "Especially in social services, sometimes you just can't predict when a client's going to have a need," he said. About 25 ABC employees who were previously exempt from overtime pay will now be eligible for time-and-a-half wages when they do extra work. One employee, said Miller, will be getting a pay raise to put him/her over the threshold, relieving the group of the need to track that employee's hours.

Stephen Petersen of Austin Java could see his pay or hours affected by the new rules (Photo by John Anderson)

Aubrey Wilkerson, who runs Out Youth, a small group in town that provides services to LGBTQ teens, similarly said he raised pay in some cases in response to the new rule. He appreciates the need to ensure workers are fairly paid, but said that he wished the threshold had been raised more incrementally so that he could have had more time to adapt his budget.

Activist groups and political campaigns, including those that view themselves as advocates for workers, will also have to contend with the new regulations. That will be a major challenge in the weeks and months preceding elections, when campaigns rely on young staffers working nonstop to get their candidates into office.

"I don't know how they're going to cope with it," Trevor Potter, a former Federal Election Commission chairman and a veteran Republican campaign hand, told The Washington Post in June. A rough analysis by Hamilton Place Strategies, a D.C. lobbying and public relations firm, estimated that low-level employees on U.S. Senate campaigns work an average of 69 hours a week and earn an average of $480 a week. Under the new rule, such workers would be in line to make much more in overtime than in base pay – or their employers will have to figure out a way to get their message out on 40-hour workweeks, rather than working their staff for nearly twice as long. A federal law bars employees from receiving compensatory time off in lieu of overtime pay unless the employee works for the government.

Currently, salaried workers who make more than $23,600 have been exempt from mandatory overtime wages if their employers classify them as having some type of managerial role. Come Dec. 1, that threshold will jump to $47,467.

A similar predicament may emerge in creative industries like advertising, entertainment, and marketing. Journalism is not immune to the issue, either. Reporters and employees who make more than the threshold can fall under the professional exemption, but many who work in those industries make less than $47,476 annually. What's more, those types of professionals routinely work well beyond 40 hours per week: taking their work home with them on nights and weekends, answering emails during bathroom breaks at restaurants, or simply thinking about or researching their respective subjects. Chronicle publisher Nick Barbaro said the paper is trying to figure out how to approach the new rule and has found issues with the ambiguities of what constitutes "work" for many of the Chronicle's salaried employees who make between the current and future threshold.

To business advocates, the options that employers and others are confronting – limit hours or boost pay – are evidence that the new rule will harm business and therefore the economy.

Casar begs to differ. He sees benefits for workers in each of the different ways employers might respond to the new rule. The purpose of overtime rules, he points out, is to discourage employers from overworking employees. "More administrative and professional workers who are getting paid in the low $40,000s, their employers will now have an "incentive" to raise their salaries or reduce their workload, he said, giving more employees "a chance at a better work/life balance." Casar also rejected the notion that the new rule would put progressive advocacy groups in an awkward position over their own treatment of workers, saying that such groups had a responsibility to be "model employers." The rule, "in fact, highlights what we all should have been doing in the first place."

Overtime in Trump's America

Alas, the Chronicle's interview with Casar took place on the Friday before last week's election, when President Obama's overtime legacy – as well as many other things far more sacred to American democracy – seemed much more secure. The council member, like many other progressives, had voiced cautious optimism about the election at the time, but said a Trump presidency would be "100 percent unacceptable." He reiterated that belief the day after the election, when he called for resistance to the president-elect's "politics of fear and hate and division."

What does the brave new world of Trump mean for overtime? In the very near term: nothing. The rule goes into effect Dec. 1, before the president-elect takes office. In the months and years after he and the new Republican Congress are sworn in, however, it's possible the rule could change.

Susan Burton is an employment attorney whose clients are largely small businesses and local nonprofits (Photo by John Anderson)

It's also possible it won't. A more conventional conservative – say Paul Ryan, Marco Rubio, or Ted Cruz – would most certainly heed the calls of the business lobby and seek to undo the Obama rule entirely or scale it back significantly. But if there is one thing that is clear about Trump, it's that the ideologies of the Democrat-turned-Repub­lic­an-turned-Reform-Party-member-turned-Republican-again-turned-independent-turned-Republican cannot be easily characterized. The small percentage of his personality cult-driven campaign that involved policy was largely a dizzying array of flip-flops. Despite advocating cuts to taxes and regulations deep enough to make a Koch brother swoon, Trump also spent much of his campaign vowing to defend entitlements that conservatives have spent decades plotting to dismantle and dissing trade deals that free market enthusiasts contend are key to American prosperity. Indeed, asked about the overtime rule earlier this year, Trump struck a moderate tone, suggesting he would seek a "delay or carve-out of sorts for our small-business owners."

There are a few different ways Trump could approach the issue. He could revise or scrap the rule through the same administrative rule process that the Obama administration just completed in order to put it in place. That lengthy process could take over a year. Another avenue would be to get a law passed by Congress. Some have floated the idea of a bill that lowers the threshold or implements it more gradually.

"They could try to do some sort of compromise," suggested employment attorney Susan Burton.

To use the parlance of our next president, it would take a bigly deal.

A nuts and bolts explanation of what the new federal overtime provisions entail is available at www.dol.gov/whd/overtime_pay.htm.

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Federal Overtime Regulations, Barack Obama, Greg Casar, Donald Trump, Ken Paxton, Galaxy Cafe, Natalie Earhart, Kevin Schlondrop, John Kunz, Waterloo Records, Stephen Petersen, Robert Campbell, Andy Miller, Aubrey Wilkerson

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