Attorney General Moves to Block Pay Raise for Wisconsin Workers
New overtime rule would be an economic boon for Wisconsin
Brad Schimel. Photo courtesy of the State of Wisconsin.
Statewide – Wisconsin has joined a group of states suing the U.S. Department of Labor over revised overtime rules that will raise wages for millions of workers. The rule is slated to take effect December 1. If the lawsuit is successful, workers across Wisconsin would be denied a much needed pay raise at the start of the holiday season.
The candidates in the Wisconsin U.S. Senate races also strongly disagree on the overtime rule, with Russ Feingold supporting it and Senator Ron Johnson opposing it.
If enacted, workers in every region of Wisconsin will be be rewarded for their hard work. When workers have more money in their pockets to spend in local communities, employment increases and prosperity expands. The economic impact of the overtime rule will be dramatic in every metro area of Wisconsin.
Table: Overtime bonus per average worker from new federal rule by metropolitan area
| Metropolitan Area | Median Annual Wage, 20151 | Average Weekly Overtime bonus, 47 hours2 | Average Annual Overtime Bonus, 47 hours/week2 |
| Milwaukee/Waukesha | $37,190 | +$188 per week | +$9,776 per year |
| Appleton | $34,965 | +$177 | +$9,204 |
| Green Bay | $35,090 | +$177 | +$9,204 |
| Madison | $39,166 | +$198 | +$10,296 |
| Eau Claire | $33,613 | +$170 | +$8,840 |
| Racine | $33,550 | +$169 | +$8,788 |
| Wausau | $33,883 | +$171 | +$8,892 |
| Fond Du Lac | $34,778 | +$176 | +$9,152 |
| Superior/Duluth | $34,008 | +$172 | +$8,944 |
| La Crosse | $33,384 | +$169 | +$8,788 |
| Sheboygan | $35,506 | +$179 | +$9,308 |
| Janesville | $32,302 | +$163 | +$9,308 |
| Oshkosh | $35,797 | +$181 | +$9,412 |
1 – Source: May 2015 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates, Median Annual Salary for All Occupations, Bureau of Labor Statistics
2 – Source: Economic Policy Institute Overtime Calculator
The Department of Labor announced that salaried workers earning up to $47,476 per year will be eligible for overtime pay. Previous rules relied on an outdated formula which excluded employees making more than $23,660 a year.
An estimated 198,000 salaried employees in Wisconsin, one out of four, will be eligible for substantial pay raises if they work more than 40 hours per week. Gallup reports that half of all salaried employees work over 40 hours, and the average salaried employee works 47 hours in per week.
The federal overtime rule revision is overwhelmingly popular in Wisconsin, with support from 81% of voters, according to Public Policy Polling.
“For years the economic deck has been stacked against working families, who have been working harder and harder with little more to show for it,” said Robert Kraig, executive director of Citizen Action of Wisconsin. “The new federal overtime rule will mean that more will be rewarded for working longer hours, boosting consumer spending in our local economies as families can afford to go out to dinner, buy necessities, and send their kids to college. That Wisconsin’s Attorney General would take it upon himself to try and block this much needed pay raise reveals the economic bankruptcy of the low road labor strategy conservatives in charge of state government have pursued.”
A salaried employee in Waukesha earning the median annual salary of $37,190 working 47 hours a week will earn an extra $188 per week, or $9,776 per year. Under current rules that stack the deck against working families, that same employee today would be uncompensated for the extra hours they work.
This change will be especially beneficial in Wisconsin, which has seen the largest decline in middle class wages in the United States since 2000.
NOTE: This press release was submitted to Urban Milwaukee and was not written by an Urban Milwaukee writer. While it is believed to be reliable, Urban Milwaukee does not guarantee its accuracy or completeness.
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The new “overtime” is B.S. I’ve not had a raise (social security) in 3 years, thanks to Obama, why should I have to paid for someone else’s raise???
Right on judy! I don’t understand why people want to expand the size of the middle class in this country. Until Obama gives old people like judy a raise, no one should get a raise. It’s that kind of short-sighted selfishness that makes America great.
I have mixed feelings about this one… I can see employers taking advantage of overloading workers forcing them to do overtime. However, I know of several situations where friends will loose some flexibility in their job that they currently enjoy because there will not be an easy way to track overtime in their role. This is by no means scientific, but I know more people negatively affected by this than positively.
Cracks me up when legislators and economically illiterate voters them simply assume there is plenty of money floating around in most businesses to simply raise pay and make everyone happy happy happy….
When payroll costs rise, employers look to manage the payroll back DOWN in order to remain profitable and/or stay in business. Usually, this means eliminating some workers whose productivity and contribution to profits is “borderline” (meaning mediocre at best). Personally, in the business I owned and others I know of, I have no problem with this outcome because the tendency of managers (like me) is to avoid “tough decisions” like firing or laying off marginal people until the economics of the business really require it be done.
What then? Well, if the business still needs to get some or all of that work done, the answer could be to hire a part-timer, or to get temps from a staffing agency, or to hire some entry level person at a lower rate of pay than the one fired so that if/when THAT person gets overtime pay the cost is no more than the fired person was making for straight time. Is this what we want to see? The cup of unintended consequences runneth over in these kinds of areas when laws are imposed, no matter how “well-meaning” they are.
Another aspect of this: Some professional/administrative/supervisory employees pay little attention to the hours they pour into their work because those hours and the resulting learning, mastery, reputation, and productivity are “career capital”. THEY will be the future leaders and executives and key employees and they are simply paying the price to get ahead. Worked for me; retired comfortably at age 57. If I had been limited to 40 hour weeks, instead of doing 50-65 regularly, I probably would have had a much harder time being noticed and ultimately rewarded (becoming a co-owner).
If one’s company has a “brutalize workers” mentality, it will figure out how to work around the overtime pay requirements and/or to squeeze workers even harder in exchange for overtime pay — lower the benefits, shut down the training center, raise prices in the cafeteria, sell the employee parking lot and let people fend for themselves. The response to that kind of thing, for an achievement-oriented person, is pretty simple. It’s not overtime pay, it’s go to work somewhere else.
Be careful what you wish for, very applicable here.
Al, I agree. There’s many companies that just won’t approve the overtime and employee’s will be forced to get more done in shorter time. That is part of what I was thinking regarding the “flexibility” some people have in that they aren’t going 110% all the time if they’re able to stay late or come in early every once in a while to make up times when they are taking work at an easier pace.
The logical argument is to simply work harder all the time… but realistically what kind of stress does it add to work at this high level all the time? Many people in the financial industry already do this and look at the evidence regarding the negative health effects of doing so. It certainly doesn’t lend itself the the whole work-life balance thing.
In the end, I doubt this law will produce the major increase in income some people expect it to.
What I don’t understand is why these big cities in Wisconsin controlled by Democrats simply don’t raise wages on their own. You can still put out the same talking points. Workers would have money in their pockets to support the local economy mantra. They all talk a tough game. It is interesting how this particular edict from Obama is magically law. What no congress? Obama must be wearing his big boy pants.
Jason (post 6):
In 1938, Congress passed a law called the “Fair Labor Standards Act” (“FLSA”). FLSA requires that most workers be paid 150% of their normal pay for any hours beyond 40 in a given week. FLSA exempts “bona fide executive, administrative, and professional” workers from this provision; those workers are called “exempt” employees.
FLSA gives the Secretary of Labor authority to define exactly what constitutes “executive, administrative, and professional”. One test of this has been a salary threshold below which a worker must be non-exempt. George W. Bush’s administration set this threshold at $455/week. Now Obama’s administration is using that same power given it under FLSA to increase that threshold (below which any worker must be classified as “non-exempt”).
Obama’s administration is acting under authority granted to it by FLSA. You can read it for yourself right here:
https://www.law.cornell.edu/uscode/text/29/chapter-8
The exemptions (and the authority of the Secretary of Labor to define what those exemptions mean) is spelled out in section 213.
Truth is, the rules are a little tricky. I wonder how many bureaucrats know enough about how businesses run to envision the likely outcomes of changing the overtime regulations. Maybe they don’t even care, for that matter, as long as the political optics are favorable for them.
Currently, the rules grant overtime pay to people who gross a salary of less than $23,660 per year on the time that they clock in beyond 40 hours in a given workweek. The big change here is that on December 1, 2016, that salary benchmark will jump to $47,476. In other words, employees who earn less than $913 per week will soon be eligible for time-and-a-half overtime pay.
First things first: Under the Fair Labor Standards Act, a non-exempt employee (that is, an employee who qualifies for overtime by law) must receive time-and-a-half pay for any hours worked beyond 40 hours in a week. Workers become exempt (not affected by overtime requirements) if their job passes both a duties test and a salary test.
The “duties test” involves the responsibilities (as defined by the Labor Department) of an executive, administrative, professional, computer or outside-sales employee. This may mean you have the authority to hire and fire, you contribute to policy decisions, you work with computer software or systems in certain capacities, you have an advanced degree in a “professional” field, or you generate sales with clients and work primarily outside of your company’s office.
This part of the overtime rules isn’t changing. What is changing is the second part; the salary threshold, which is more than doubling.
Jane Lauer Barker, a labor attorney and partner at Pitta & Giblin LLP in New York City: “The main group that the Labor Department concluded was going to be affected by this are people who have the title of ‘Manager’ or ‘Assistant Manager’ in retail or service operations,” because of what their responsibilities entail and where their typical pay falls”. But any position that can’t pass both the duties and salary tests will now be fair game for overtime pay.
One of the roles of Human Resources executives (I was one) is to help the company keep its compensation expenses “competitive” relative to other companies, so don’t be surprised when companies make some changes to avoid signing everyone up for overtime and to manage their labor costs. For example, the numbers of people holding some positions in organizations may decrease through automation — or by increasing span of control (that is, the number of employees under each manager). In other words, by streamlining the organization chart. Other strategies will be brought to the table as well and one or more of four scenarios will likely play out in some organizations:
1. An employee could get a small pay bump, especially if their salary is just below the new threshold. This would effectively make them exempt from overtime pay and might be more cost-effective for the company because hours worked in excess of 40 a week would then not warrant overtime pay.
2. The employer may keep an individual’s current pay in place and no longer allow him/her to work overtime, so once they hit 40 hours, their workweek is officially over. Instead, extra work may be distributed to other employees or more people might be hired to even out the workload. While this option means an individual won’t be bringing in extra cash for the overtime hours normally worked, more free time could mean opportunities for other income-earning pursuits or enrolling in academic or professional development classes to advance their careers.
3. An employer could change a person’s pay status from salaried to hourly, with the option for overtime hours. I think the employer would be well within its rights, given the new salary cutoff, to change that employee’s status to hourly paid. Presumably, the employer would maintain the pay of the employee by ensuring that the hourly rate times 40 hours would be close to what the employee is being paid now [in salary] and then just be prepared to pay overtime for work in excess of 40 hours.
The flip side of this is that there could be weeks when one works less than 40 hours, which would mean less pay than the prior weekly salary. In a possible worst-case scenario, an employer could establish a lower hourly rate than what you’d get by dividing the weekly salary by 40. Since that person would be making less per hour, he/she would likely have to continue working overtime just to maintain the prior salary pay.
While the new overtime rules may seem like only a good thing for workers, some will be concerned about a potential negative impact on their careers. A young employee might worry about the impact of a limited workweek. For someone in their first job out of college, for instance, it may be natural to put a lot of time into the job because they are learning everything. That person might worry that his/her hours will be limited because the employer won’t want him/her to put in extra hours.
Other groups who are—and will continue to be—exempt from this standard include teachers, physicians, attorneys, police and first responders, among others. “They’re covered by separate exemptions, and this increase in salary threshold does not affect them at all,” Barker says.
Time will tell exactly how these new overtime rules actually play out. For example, legislation has been introduced to initiate a three-year phase-in for businesses to meet the new $47,476 overtime threshold, instead of making the jump by December.