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Overtime Rules Help the Economy

Franklin D. Roosevelt quote, June 24, 1938

This is a cross-post from Regs Talk, the National Employment Law Project (NELP) blog. Catherine Ruckelshaus is the legal co-director of NELP. 

Big drug companies’ salespeople don’t usually inspire much sympathy for being overworked or exploited. But last week’s Supreme Court decision in Christopher v. GlaxoSmithKline was a reminder that even pharmaceutical sales representatives, who brought a case for working 60-odd hours a week without being paid overtime, can face unfair working conditions that need to be checked.

This week marks the 74th anniversary of the Fair Labor Standards Act (FLSA), which established a minimum wage floor, outlawed some forms of child labor and discouraged overly long workweeks by requiring premium pay for any hours worked over 40 in a week. By paying time-and-a-half of one’s regular hourly wage for overtime, the policy is intended not only to compensate workers for long hours but also to promote work sharing or spreading by employers, who can hire additional workers for the extra hours needed. Especially in tough economic times, it’s a practice that is not only fair but makes good economic sense.

In a nutshell: workers should not shoulder the burden of a weak economy without extra pay.

First, when an employer insists on long hours per week, workers lose out on time they could be spending with their family, on parenting, going to school or leisure time. Last year, The Wall Street Journal recognized that while productivity gains were on the rise, companies were keeping most of them for themselves: they gave their super-productive employees only 6 percent of the gains, which translates to a 0.3 percent increase in wages.

Second, stretching workers’ hours to cover for laid-off colleagues without paying overtime decreases the employer’s incentive to hire more people. This is especially relevant during periods of high unemployment.

In the current economic downturn, remaining workers who were not laid off have been forced to work longer hours, often for the same pay, according to a recent overview by USA Today. The review found that while productivity rose 4 percent in 2010, a big jump over previous years, this was in part due to squeezing more hours from fewer workers. Employers have become more aggressive, requiring workers to work off the clock and calling them exempt from overtime while requiring long hours. The Glaxo pharma sales reps were treated this way, and fast food and retail workers dubbed “managers” at Wal-Mart and other places often are as well.

Employers get away with this chiseling because overtime enforcement is difficult. Enforcement relies on worker complaints, and incumbent workers don’t want to risk losing their job. In periods of high unemployment, like now, asking for fair pay is job suicide. The U.S. Department of Labor is starting to investigate abuses without waiting for individual complaints and weighed in on the Glaxo workers’ side, saying they should get paid for their overtime hours, but the Supreme Court was unmoved.

If employers did the right thing and followed overtime rules, workers would be able to spend time at home with loved ones or simply enjoy a few well-earned hours of rest. And we might even see an uptick in new hires.

For more information on the Federal Labor Standards Act (FLSA) anniversary, click here

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