Overtime Pay Going Up for More Than a Million Workers

Summary

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WSJ Your Money Briefing

Episode: Overtime Pay Going Up for More Than a Million Workers
Date: September 25, 2019
Host: J.R. Whalen
Guest: Andrew Ackerman (WSJ Reporter)

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Episode Overview

This episode explores the new U.S. Department of Labor rule that will expand overtime pay eligibility to more than a million workers, including some salaried employees. WSJ reporter Andrew Ackerman breaks down which industries are affected, how the salary threshold is changing, the potential for legal challenges, and how federal rules compare to state requirements. The conversation also touches on upcoming regulatory moves from the Labor Department.

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Key Discussion Points & Insights

1. Who Is Impacted by the New Overtime Rule?

• Scope: About 1.3 million workers, primarily in retail and fast food.
  • "They're in retail and fast food industries. Cross clothing retail employees made an average of $488 per week. Fast food workers earned $385 per week on average." (Andrew Ackerman, 01:53)
• Target Group: Workers earning $684 per week or less will be newly eligible for overtime.

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2. Changes to Salary Thresholds and Industry Coverage

• Threshold Increase: The minimum salary to be exempt from overtime increases from ~$23,000–$24,000 to $35,000–$36,000.
  • "It just the threshold increases significantly from about $23,000 $24,000 to 35 $36,000. And so that just sweeps in over a million people who weren't covered by the previous salary threshold." (Andrew Ackerman, 02:20)
• Industries: The rule does not introduce new industries, but brings in more workers in existing sectors due to the higher salary cap.

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3. Impact on Managers and Highly Compensated Employees

• Separate Provision: Small increase in the threshold for 'highly compensated employees' (HCEs).
  • "They would see basically that threshold rise increases from about $100,000 to $107,000. The Trump administration had proposed increasing that threshold much higher...but they increased it only slightly, saying that their proposal was just too high." (Andrew Ackerman, 02:50)
• Definition: HCEs supervise at least two people or have a management role.

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4. Legal and Political Landscape

• Potential for Court Challenges: Uncertainty if workers' unions or other groups will challenge the rule.
  • "It's not clear if there will be a court challenge. It's very possible that workers unions may challenge this rule. We don't have clarity...it was heavily litigated in 2016 when the Obama administration completed it..." (Andrew Ackerman, 03:44)
• Historical Context: The previous overtime overhaul under the Obama administration was struck down in court.

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5. Comparison to State-Level Rules and Minimum Wage Efforts

• Federal vs State Thresholds: Some states already set higher overtime thresholds than the new federal rule.
  • "California already has overtime rules that far exceed the federal threshold. And New York City also has thresholds that are higher than this. ... Maine, Colorado, Massachusetts, they all have overtime thresholds that are going to exceed the federal thresholds, already exceed that or soon will likely exceed them." (Andrew Ackerman, 04:23)
• Minimum Wage: The overtime rule moved forward with less protest and legislative struggle compared to minimum wage increases.

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6. Upcoming Labor Department Regulatory Actions

• Joint Employer Rule: A significant rule change expected soon to clarify when two companies share responsibility for the same worker.
  • "One of the key pushes of the Trump administration is to set in place a number of sort of deregulatory rules...This rule, the on overtime and the joint employer 1 are two of the biggest ones that are in the pipeline." (Andrew Ackerman, 05:31)
• Labor Department Leadership: The pace of regulation is expected to pick up with new leadership in place.

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Notable Quotes & Memorable Moments

• On who benefits:
  "It's going to affect 1.3 million people. They're in retail and fast food industries...this rule basically targets people who is going to help people who make $684 a week or less."
  — Andrew Ackerman (01:53)

• On thresholds:
  "It just the threshold increases significantly from about $23,000 $24,000 to 35 $36,000. And so that just sweeps in over a million people who weren't covered by the previous salary threshold."
  — Andrew Ackerman (02:20)

• On possible challenges:
  "It's very possible that workers unions may challenge this rule. ... I think it's fair to assume that that's likely or at least a possibility."
  — Andrew Ackerman (03:44)

• On state-by-state variation:
  "California already has overtime rules that far exceed the federal threshold. And New York City also has thresholds that are higher than this."
  — Andrew Ackerman (04:23)

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Timestamps for Important Segments

• [01:53] — Industries and workers impacted by the new rule
• [02:20] — Details on threshold changes and coverage
• [02:50] — Impact on managers and highly compensated employees
• [03:44] — Legal and political backdrop, likelihood of challenges
• [04:23] — Federal rule vs. state rules and context of minimum wage battles
• [05:31] — The upcoming joint employer rule and regulatory agenda

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Summary Takeaway

This episode provides a concise, practical breakdown of significant changes to overtime eligibility in the U.S., highlighting who will benefit, the legal and political context, and the intersection with state and federal regulations. With changes rolling out January 1 and more rules on the horizon, listeners are encouraged to follow developments closely—especially if they’re in the retail or fast food industries, or are managers at the salary threshold.

Transcript

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[J.R. Whalen]

Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. More than a million Americans will soon be eligible for overtime pay, even some salaried workers. We'll explain in a moment. First, some money and market news you should know. With unemployment rates at 50 year lows, US workers have been job hopping, more switching for better pay. Those pay bumps were often out of reach for lower paid workers until now. The New York Fed says that more than one in 10 heads of household earning $60,000 or less switched jobs in April, May, June or July, about twice the rate from the same period a year ago and higher than it's been in five years. The unemployment rate among Americans without a high school diploma has dropped over the past three years. And the rate for black women fell in August to the lowest level on record. The recent uptick in home sales looks like it'll continue. Home buyers cashing in on mortgage rates that have fallen below 4% are also seeing prices level off. Nationwide, home prices rose just over 3% in July. That was unchanged from the previous month. And even though home prices have risen from over a year, they're going up at a more modest pace. A new rule that goes into effect January 1 would allow about a million people to collect more overtime pay. So which industries are affected? Let's check in with Wall Street Journal reporter Andrew Ackerman for some answers. So Andrew, which industries are impacted by this new law?

[Andrew Ackerman]

It's going to affect 1.3 million people. They're in retail and fast food industries. Cross clothing retail employees made an average of 488 per week. Fast food workers earned 385 per week on average. And this rule basically targets people who is going to help people who make $684 a week or less.

[J.R. Whalen]

So does this new rule bring any new industries into the fold or does the scope of industries impacted stay the same?

[Andrew Ackerman]

My understanding is that the scope stays the same. It's the same type of hourly workers in a variety of different industries. It just the threshold increases significantly from about $23,000 $24,000 to 35 $36,000. And so that just sweeps in over a million people who weren't covered by the previous salary threshold.

[J.R. Whalen]

Now overtime has typically been for hourly workers, but this rule also affects some managers and other salaried employees, right?

[Andrew Ackerman]

Yeah, there's a separate provision of this, a separate category of workers that would also see a modest increase in the threshold. That's for called highly compensated employees, basically people who manage at least two people or supervise at least two people or have a role in managing the company. They would see basically that threshold rise increases from about $100,000 to $107,000. The Trump administration had proposed increasing that threshold much higher. It was going to be 147,000, which would have presumably encompassed a lot more employees. But they basically, they increased it only slightly, saying that their proposal was just too high.

[J.R. Whalen]

An overtime overhaul was on a path to becoming law during the Obama administration, but it was struck down in the courts. Should we be expected to see that happen again?

[Andrew Ackerman]

Yeah, it's not clear if there will be a court challenge. It's very possible that workers unions may challenge this rule. We don't have clarity. Sure. But just given the fact that this was heavily litigated in 2016 when the Obama administration completed it, successfully litigated by business groups in some states, I think it's fair to assume that that's, you know, that's likely or at least a possibility.

[J.R. Whalen]

Now there's been a big push to increase the federal minimum wage and a number of states have already bumped up their minimum wage as well, but not without months of protests and legislative battles. Were there similar struggles that got us to passage of this overtime roll?

[Andrew Ackerman]

I think there's been a recognition that the threshold set in 2004 is outdated and does need to reflect, you know, overall growth in wages and salaries. And it's just a question of where, where the, where they settle. And the Trump administration kind of settled on a middle ground, a figure that's between what the Obama administration proposed and the 2004 figure. I think a lot of employees are going to, our workers are going to prefer something closer to what the Obama administration proposed. And I think at the state level, you're already seeing over rules that outstrip the federal requirements, particularly in higher cost jurisdictions. California already has overtime rules that far exceed the federal threshold. And New York City also has thresholds that are higher than this. And you're seeing that in other states where I believe Maine, Colorado, Massachusetts, they all have overtime thresholds that are going to exceed the federal thresholds, already exceed that or soon will likely exceed them.

[J.R. Whalen]

And in addition to the overtime rule, the Labor Department is also tackling the scenario where somebody is employed by two companies.

[Andrew Ackerman]

Yeah, there's a joint employer rule that's kind of a big ticket thing that, that's coming soon, probably next month. One of the key pushes of the Trump administration is to set in place a number of sort of deregulatory rules that didn't advance very quickly under Alexander Acosta. The White House has put kind of a fire under the Labor Department officials to get those rules done. This rule, the on overtime and the joint employer 1 are two of the biggest ones that are in the pipeline.

[J.R. Whalen]

Alexander Acosta being the former labor secretary who left the administration and a new labor secretary is coming in. All right. That's Wall Street Journal reporter Andrew Ackerman joining us from Washington. Andrew, thanks so much for coming on the show.

[Andrew Ackerman]

Sure thing. Thanks for your time.

[J.R. Whalen]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

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