Overtime Overkill

 

There is a concept that it is the duty of policymakers to make laws that are not easily circumvented or whose purpose cannot be overshadowed by negative consequences of a strict application of the law. Unfortunately, laws with narrow legislative intent (that only address the concerns of a small portion of a larger population) often result in unintended negative consequences that affect other (previously content) populations.

Legislatures should be avoid changing general broad rules to address specific or anecdotal cases that are easily circumvented or whose narrow intent leaves others in a more vulnerable position.

A recent example of a law like this can be seen in the proposed Department of Labor regulations regarding overtime for salaried employees.

Current Rule:

Salaried employees who earn more than $23,660 a year ($455 a week) are ineligible for overtime even if they work more than 40 hours a week.

New Rule:

Raises the threshold to $50,440 ($970 a week) for ineligible status.

Employee Motivation(s)

This new regulation seems great at first!Overtime2

More hardworking salary employees will get paid for their overtime. The situation gets cloudier when you consider why people have jobs in the first place and their current primary motivator (income, personal satisfaction, or learning a valuable skill). It is extremely likely that every person will have jobs over their career where the primary motivator changes between the three pillars. Therefore, a law prioritizing one of these motivators (income) at the expense of another will act as a barrier for some people to find and keep what they deem to be meaningful work.

It is the right of every worker to place value on the aspects of employment that she considers the most important. This law would hinder that right.

Why does the concept of a “salary” even exist?

Stability (to employee) and consistency (across employees with same function).

A salary is the value based (vs. cost based) pricing model of the workplace. The company pays the employee for the value of the service she brings to the organization, not the cost for her to bring it.

It would breed extreme inefficiency (and illogical outcomes) in an organization if two managers who performed the same duties were paid under the new law. Inefficient manager (B) who worked 49 hours and received nine hours of overtime pay would be paid 34% more than the efficient manager (A), who gets her job done in 40 hours / week.

Overtime5

In this situation, manager B would surely be reprimanded to curb her extra hours or would be fired for her inability to efficiently perform the duties of the position. Meanwhile, the rest of the company, including the efficient manager A, has less capital to invest in the growth of the business and therefore less opportunity for success. This very sad outcome could have been avoided, but for the seemingly ‘reasonable’ law.

If this is a good system for people making a $50k salary, why doesn’t the same logic apply to a $150k salary?

In situations like this, benchmarking to a ‘reasonable’ number ($50k is neither too high nor too low) can lead you to say the policy is ‘reasonable’. This however would be a mistake. By replacing the reasonable number ($50k) with a less reasonable number ($150k), the policy’s effectiveness in accomplishing its intent is greatly diminished.

There are many people who make $90k or $130k per year salaries who work much more than 40 hours / week. Why don’t these people deserve the protection of the government? We all agree they don’t; but why not? It is probably because we all see these are skilled workers who likely need to work more than 40 hours / week to accomplish all they do. The way these people became skilled workers is by WORKING (many more than 40 hours / week). How do we expect the next generation of highly skilled and paid workers to progress if they cannot do so under their own value system?

By restricting people who must charge overtime to those under $50k salary, the law would actually hinder the long-term progress of those whom it seeks to help.

Opponent: If you want to work so bad, just waive your right to get overtime pay.

A waiver is likely a reasonable workaround for someone who actually values learning a valuable skill or the personal satisfaction of a particular job over overtime pay. However, if this type of waiver were allowed, it would completely undermine the intent of the law (to keep lower earners from being taken advantage of). If a waiver were allowed, bad companies would simply force encourage (overtly or covertly) employees to sign a waiver as part of their onboarding package and circumvent the entire law. This is the type of potential circumvention that legislators should avoid whenever possible.

Conclusion

Individuals should have a right to place value on their work experience as they see fit. This value could come in many forms including income, learning a valuable skill, or personal satisfaction depending on the life situation and future goals of the worker. Additionally, as shown by the example of manager B, affected workers can actually be hurt by being required to manage their time arbitrarily to 40 hours / week.

Links:

http://fortune.com/2016/01/06/overtime-lawsuits-rules/

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