Today the Obama administration officially proposed new regulations that it says will entitle at least 4.6 million additional Americans to overtime pay. On the whole, it seems like a reasonable move that may encourage businesses to hire more workers rather than milk employees for all the uncompensated labor they can get away with.
But, man, let me tell you—this is going to make life difficult for your favorite magazines and websites.
Under the rule change, most salaried employees who earn less the $50,440 per year will automatically be eligible for time-and-a-half pay when they work more than 40 hours in a week. Currently, the cutoff is just $23,660, after which workers can be exempt from overtime requirements if they're considered management or a professional.
Why the need for such a big jump? Labor activists and progressives argue that today's overtime threshold lends itself to all sorts of abuses by employers, who find tricky ways to categorize low-salary workers as supervisors in order to get out of paying them for all their hours. This happens, partly, because the rules about who counts as a manager are murky at best. At a big box store, for instance, somebody might be called a supervisor if she spends a part of each day coordinating her colleagues' schedules, even though she spends the vast majority of her time behind a cash register or stocking shelves.
“Because you have these regulations that are so fuzzy, we basically have this whole group of people who are faux-managers and faux-supervisors," Judy Conti, the National Employment Law Project's federal advocacy coordinator, told me. "They have to work for $30,000 a year, and 60 hours a week, and they end up making less per hour than the people they purportedly supervise, because they have to work all of these hours uncompensated.”
Raising the bar on exemptions to $50,440 should eliminate that problem by ensuring that low-pay workers who don't have much on-the-job bargaining power qualify for overtime no matter what creative job description their employer concocts for them. (Hourly workers, typically, are overtime-eligible no matter what they make.) It also brings the threshold exactly back to where it would have been had the government adjusted it for inflation every year since 1975, when it covered 65 percent of salaried employees, as opposed to the mere 11 percent who fall under it today. The sorts of jobs affected include a lot of typically lower-middle-class occupations in retail, fast-food, and customer service, as well as white-collar office workers like some insurance agents and paralegals.1
How exactly the rule change will affect those workers is a bit unclear, though there are reasons to think it'll be a net benefit. Of course, businesses could simply choose to pay their employees more. But more likely, they'll find other ways to adjust. For starters, they might lower base pay for some jobs that they expect to involve more overtime. They might also choose to hire more workers and ask them to work fewer hours. The National Retail Federation, which leans extremely conservative on labor issues, warns that “while the total number of workers employed by these industries would likely grow, the quality of these jobs would diminish: they would be low-paying and often part-time, and many workers currently in lower-level professional and managerial jobs would find their status jeopardized.” Those concerns seem a bit exaggerated, however. Equally likely, many part-time employees who want more hours may get bumped up to full time while their underpaid, overworked "bosses" get some time off.
That said, there will be trade-offs. There is probably at least one aspiring restaurant manager at your local Chipotle who would be happy to pull a slightly longer shift without extra pay for the sake of a promotion. The Department of Labor's proposal will make that a lot harder to do.
Then there are the creative industries, which are singularly ill-suited to deal with these rules. I'm going to use journalism as an example here, because I know it. But you could sub in other businesses at will.
As you're probably aware, large swaths of the publishing world run on the energy of ambitious, educated, and badly underpaid young people, who are willing—and often content—to work long hours for the sake of being read, and potentially noticed by editors elsewhere who will one day hire them for more money. There are a few problems with subjecting those eager twentysomethings to overtime rules.
First, the government isn't necessarily protecting them from exploitation. While journalism and other creative fields have been guilty of some indefensible labor practices—hello, unpaid internships— advancing in them requires building a body of work over time that will impress future employers. Sometimes that requires a bit more than 40 hours a week of effort.
Writers are also idiosyncratic. Some spend hours neurotically finessing their articles. Some happily knock out eight posts in a day. That makes it hard to guess how long any one job should require in media—it depends too much on the person filling it. And if you can't quite predict how long your next staffer will need to do their work, you can't really lower their base pay in order to account for the overtime you'll theoretically have to shell out because someone decided to spend a few late nights crafting the great American think piece. As an alternative, publications could issue a blanket rule against working more than 40 hours, but then, the Internet would probably have about two-thirds the news you enjoy today, and the meager profits we earn by tricking you into glancing at ads would dwindle further. As for hiring more bodies, again, budgets are a bit tight.
Finally, it's sometimes really, really hard to define what counts as work in this business. When I'm reading the Upshot or the Wall Street Journal in the afternoon, am I just zoning out, or am I keeping abreast of the competition? It's tough to say. What about the hours I spend tweeting? Am I goofing off, or am I promoting my personal brand? Probably a bit of both, but labor law doesn't countenance those sorts of ambiguities.
To be sure, there are some news organizations that do pay overtime. But for a lot of the industry, it would be an untenable norm. And the overarching point here is that, while overtime functions pretty well when it's used to discourage companies from working vulnerable employees in low-skill positions to the bone, it's not necessarily appropriate in creative industries where educated young people are out to make a name for themselves and margins are thin.
That's one reason why the Department of Labor already offers an overtime exemption for creative professionals (interestingly, it doesn't cover journalists in all circumstances, but let's not digress). But it looks like under the Department of Labor's new rule, it won't be applicable to anybody earning under $50,440. My guess is that this will result in two things: First, lots of publications will simply ignore the overtime rules, partly with the implicit consent of their employees. Second, there will probably be some lawsuits by people who decide, ex post facto, that they were forced to work extended hours without being properly compensated.
One solution might be to keep overtime rules looser for creative types. But there's a chance that might open up loopholes that would help companies cheat other workers out of their overtime. “I am sure there are some industries that are going to be more challenged by this than others," Conti told me. “At the same time, the law was put in place so that people can’t work abusively long hours for abusively low pay.”
Even if some of us might want to.
1In case you're wondering, doctors, lawyers, and educators are also exempt from overtime rules, meaning medical residents, public defenders, and your kid's third-grade teacher aren't suddenly going to be earning extra pay.