On March 13, 2014, Dave Jamieson writes on The Huffington Post:
In her years managing a small dollar store in Michigan, there were times when Dawn Hughey worked 60, 70, or even 80 hours a week just to keep the place running on a short staff. But no matter how many hours she logged, she was paid the same flat salary in the mid-$30,000s.
Painful as it was, Hughey often did the math. During the more crushing weeks, she earned a not-so-managerial $10 per hour, barely more than the people who worked for her. And she nonetheless found herself doing the same duties as them — stocking shelves, manning the cash register and cleaning the floors.
“It was more like 60 or 70 hours a week than the 44 or 48 they told you when you got hired,” Hughey, who no longer works for the company, told HuffPost. She said she used to laugh inside when her hourly workers said she got paid “the big bucks” for being a manager.
If Hughey felt she was overworked and underpaid, there was a simple reason for her predicament. As a manager earning more than $23,660, Hughey had been carved out of U.S. overtime protections, like thousands of other workers in supervisory roles in the retail sector. Her company therefore had an incentive to pile work onto Hughey, rather than onto her hourly employees, since they weren’t paying anything extra for it.
That could soon change, due to reforms now being pursued by the White House. On Thursday, President Barack Obama signed a memo directing the Labor Department to rework the rules regarding overtime. The reforms are expected to raise the salary threshold that currently allows employers to exclude workers from overtime pay under the Fair Labor Standards Act. It hasn’t been raised in more than a decade.
Although the White House hasn’t yet said what the new standard will be, the change will make more workers like Hughey eligible for time-and-half pay on hours they work beyond 40. It could be more than a year before the final rules are reviewed and adopted.
“If you’re making $23,000, typically you’re not high in management,” Obama said at a press conference Thursday. “If your salary is even a dollar above the current threshold, you may not be guaranteed overtime. It doesn’t matter if its 50, 60 or 70 hours a week. Your employer doesn’t have to pay you an extra dime.”
It’s hard to overstate how these reforms could change some people’s lives. If Hughey, for instance, had been eligible for overtime pay, she could have earned thousands of dollars more per year in salary. But more likely, her company would have tried to keep her schedule in check so as to avoid paying a premium on all her extra hours. That, in turn, would have given Hughey the life outside of work she felt she never had.
“It would have made everyone a lot happier in their job,” Hughey said of the news. “It’d be a great thing, and I hope he [Obama] can get it through.”
As HuffPost reported last year, some retailers employ a labor model that appears designed to exploit the overtime exemptions in U.S. labor law. Dollar stores in particular — Dollar General, Dollar Tree and Family Dollar — have been sued scores of times by employees claiming they’ve been shorted on pay. Many of those workers claim their employers have made them salaried managers in large part to avoid paying them overtime.
Heidi Burakiewicz is a lawyer who’s represented workers in class-action lawsuits under the Fair Labor Standards Act. She said she once heard from a woman who managed a small kiosk at a shopping mall, often alone. The mall’s rules required that the kiosk remain open any time the mall was open. Since her employer viewed her as exempt from overtime law, the woman worked practically two people’s hours for the price of one.
“When you average it out, you’re making a ridiculously small hourly wage,” Burakiewicz said. “This is exactly who the Fair Labor Standards Act was meant to protect — people who are low-paid and overworked.”
As for the reforms expected from the Obama administration, “It could make a huge difference in many people’s lives,” Burakiewicz said.
Growing out of the labor strife of the Great Depression, the Fair Labor Standards Act was enacted in 1938 and established a minimum wage and overtime protections for U.S. workers. Employees who were part of management and paid on salary were exempted from overtime pay. As Jennifer Klein, a Yale history professor, previously explained to HuffPost, in a mid-century factory the line was pretty clear dividing the brass from the rank-and-file workers.
The modern economy — particularly the service sector — is a much different animal, Klein said.
“Employers obviously have a lot of incentive to exploit the ambiguities and continue to manipulate the meaning of ’employee,'” Klein said. The system “actually forces the management to squeeze people, to squeeze them and make them work hours off the clock, and for managers to pick up the slack.”
The number of lawsuits alleging minimum wage and overtime violations has ballooned to record highs in recent years, more than quadrupling since the late 1990s. There are a few theories as to why this is happening, including the idea that more lawyers are seeking big settlements through class-action suits like the ones against dollar store chains. But it’s also possible that more employees are feeling overworked and underrewarded for their efforts, and they’re growing more assertive of their rights under labor law.
The retail lobby is naturally worried about whatever tweaks Obama makes to overtime law, since many retail store managers could suddenly become eligible for overtime. In a statement on the news, the National Retail Federation said that “If implemented, this would have a significant job-killing effect.”
Whether or not it kills jobs, extending overtime pay to more salaried managers will surely leave retailers with a choice to make: Either pay those workers more money for their time, or give them a greater life outside of their stores.
An even better way to put more money in the hands of working people, who then could go out and make purchases that would help create more economic growth and more jobs would be to empower workers to acquire full-dividend, full-voting stock in the corporations they work for using a justice-based Employee Stock Ownership Plan (ESOP), with the capital credit loans paid off with the future earnings of the investments in asset-based growth.
