A few words on overtime. . . there’s a lot of grey

The context:  the Obama administration is in the process of determining an updated salary threshold for overtime-exempt status, per, among other sources, Politico (look at the Pinocchio photo).

Advocates are treating this as a pay hike, pure and simple, per the headline:  “Barack Obama poised to hike wages for millions,” that is, affected workers will receive overtime where they hadn’t before, as an unalloyed gain.  Opponents are building up stories of jobs lost, or reductions to part-time — though, for a moderate voice, see this article from the Heritage Foundation, which says that employers will, in general, adapt with lower base pay rates, so it’s not a big deal, but that one real outcome will be a curtailment in worker flexibility:

Unfortunately, the overtime regulations will have a major unintended side effect: They will force entry- and mid-level salaried employees to track their hours.

Many salaried employees can work remotely. This flexibility helps them juggle their professional and personal lives. They can, for example, leave early in the afternoon to be with their children, then finish their work in the evening when their children have gone to sleep. Their employer only cares about the job getting done.

Now their employer will have to care about when they do their work. The law will require employers to track salaried employees’ phone calls made off-site, hours put into reports edited from home, and time put into writing emails remotely. If they don’t, they will risk lawsuits. The 16 to 25 million Americans who telecommute at least once a month will face particular challenges.

Many businesses will respond by curtailing flexible work arrangements. They will force salaried employees below the threshold to do all work in the office, whether or not they would prefer to work remotely. As the head of human resources for Pitney Bowes explained to reporters, the company denied overtime-eligible employees requests to work from home because: “You just don’t take the [legal] risk.”

The trouble with the entire system is that it presumes that there are two classes of employees:  workers on a time clock, whose work is completely prescribed by an employer, and managers and professionals, with complete flexibility.  It’s pretty clear that assembly-line workers, fast-food employees, call-center workers, and others whose job depends on being in a specific place and doing a specific task, with identified break/lunch times, are in the former category.  It’s equally clear that a professional such as, well, an actuary, whose work involves a fair amount of flexibility in how you structure the work, with client allocations and client projects dictating a certain cycle during the year but also requiring that one plan ahead, work ahead during periods without immediate deadlines, etc., and whose pay, at least in terms of bonus decisions and raises, is based on one’s productivity over the year — that this sort of work is clearly in the non-exempt category.  The joke used to be:  “we’re very flexible.  We let you decide where and when you put in your overtime.”

But there’s a big grey area.

Let me tell you about my brother.

For a while after college, he worked at a major discount store.  Their process at the time was to start all new hire, recent graduates, as assistant managers in the stores, which is fine, in principle — learn the ropes before moving on to headquarters.  How much time he spent actually “managing” anything, vs. doing the same stocking, clean-up, etc., as the employees, varied, and he didn’t have control over his schedule, either  — the manager scheduled the assistant managers to their shifts.  And once or twice a year, for a couple-week stretch, there was Inventory, when all the exempt workers put in extreme working hours, coming home for less than 8 hours of sleep before leaving again.

Yes, one could say that, as long as these assistant managers knew the rules of the game going in, the work-hour expectations over the course of the year, fair’s fair.  But you could use this same argument to say that every employee should be exempt, with work hours at the discretion of the employer, and the employee free to choose the employer who offers the highest pay, assuming work hour expectations are fully disclosed.  But we recognize that there’s a social good in creating a 40-hour/week norm.

And in this example, the employer used the fact that their “assistant manager” employees were overtime-exempt (and, generally, young, fresh from college, hoping for that transfer to headquarters) to require them to work hours that, ethically, should have been paid, and spread out among the other workforce, or alternatively, could have been avoided via an alternative process.

But yet, Heritage also has a point:  having members of your staff exempt from overtime allows work flexibility that can’t happen if an employer has to track every minute for compliance purposes.  Heck, right now, it’s a scheduled workday for me, but remote access is down; I expect to make up the time later.

It’s also the case that, assuming that employers simply adjust base pay so that total payrolls are, essentially, unchanged, it may still be to the detriment of the employee to be paid overtime, since that means that pay would be uneven and unpredictable over the course of the year, where landlords or mortgage-holders, of course, don’t care that any given month was a slow period with no overtime.

And it is also significantly more complex to administer base pay + overtime.

In a perfect world, the job type rather than pay, would determine overtime eligibility — but, then, the threshold is in place exactly because of the employer tendency to stretch the definition to classify as many workers as exempt as possible.

So:  yeah, no real answer, except to say that if someone says “this’ll raise workers’ pay” or “this’ll destroy jobs”:  don’t believe ’em.

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