Think Tank: Expand Pool of Workers in NJ Eligible for Overtime

John Reitmeyer | October 25, 2019 | More Issues
Change in policy suggested by influential liberal group would add 315,000 white-collar workers to ranks of those who can make time and a half
Credit: @lelia_milaya via Twenty20
Office workers stand to benefit from the policy change.

A much bigger pool of workers in New Jersey would be eligible to receive overtime pay when their employers make them work long hours under a new labor policy that a leading liberal group is pressing.

New Jersey Policy Perspective, a Trenton-based think tank, is calling on Gov. Phil Murphy to raise the salary threshold for exempting some white-collar workers from overtime pay — known as “time and a half” ­— to $78,000 in New Jersey by 2024.

The change would more than double a new federal threshold of $35,568 in annual salary that’s due to go into effect across the country in January. It could also grant overtime eligibility to more than 300,000 office and other white-collar workers in New Jersey if enacted, according to a report released by NJPP yesterday.

Responding to the group’s proposal, a spokeswoman for Murphy stressed the importance of overtime protections and also said the governor has directed labor officials to review the issue. But officials from the New Jersey Business & Industry Association said raising the threshold would only add to already high costs associated with operating a business in New Jersey.

Setting eligibility standards for overtime pay dates back more than 80 years to the adoption of the federal Fair Labor Standards Act in 1938. Under that law, which has been updated several times, an exemption exists for salaried, white-collar workers who perform non-manual functions and have responsibilities and duties that can be deemed managerial, executive or professional. Their annual pay is also a factor, and the current salary threshold for exempting them from overtime is set at $23,660.

Under a change authored by the administration of President Donald Trump, the salary threshold will go up on Jan. 1 to $35,568, an increase of about 50%. That comes after an attempt by former President Barack Obama to bump the benchmark to $47,476 was blocked in federal court.

OT rule has failed to keep pace

But to make the case for an even higher salary threshold, NJPP compared the overtime policies that were in place at the federal level during the 1940s through the 1970s, when there was widespread economic growth at all income brackets. During most of those years, the income threshold for overtime eligibility hovered above 2.5 times the annual salary of a minimum-wage worker.

As a result, NJPP is calling on Murphy to set New Jersey’s overtime threshold at 2.5 times the minimum wage in New Jersey, which is currently $10 an hour. Under the NJPP proposal — which could be enacted by Murphy without legislative approval — the state’s overtime threshold would be $52,000.

But the group also wants the threshold to ramp up along with the minimum wage, according to a schedule enacted by Murphy earlier this year that calls for a minimum wage of $15 by 2024. Under that schedule, the overtime salary threshold would rise next year to $57,200 as the hourly minimum hits $11 and to $78,000 when it tops out in 2024.

Under the proposed policy change, an estimated 315,000 workers would qualify for overtime pay for the first time, according to the NJPP report.

“A prosperous New Jersey depends on the livelihood of all our workers,” the report said. “In fact, the state economy benefits most when workers are able to earn fair pay for all the hours they work while balancing employment responsibilities with family obligations.”

The proposed overtime rule changes are also being backed by a statewide group that advocates for workers and immigrants. Make the Road New Jersey has already launched an online petition to collect the signatures of others who support the overtime proposal.

Administration to review recommendation

Murphy, a first-term Democrat, has adopted a number of policies favored by NJPP since taking office earlier last year, including the minimum-wage increase. Murphy spokeswoman Christine Lee said the group’s report is being reviewed, but she declined to comment on any specific policy recommendations.

“(Murphy) has directed the New Jersey Department of Labor and Workforce Development to assess and provide guidelines on how we can best ensure that our workers thrive,” Lee said.

Meanwhile, NJBIA, a leading business-lobbying group, raised a number of concerns about the overtime proposal, including how it could further impact businesses already trying to adapt to the state’s rising minimum wage.

“Raising the overtime requirement salary threshold and expanding the pool of employees eligible for overtime, in addition to the new minimum wage law in New Jersey, will lead to employers providing less overtime to their workers,” said Michael Wallace, NJBIA’s vice president of government affairs.

“It will also add to the already high cost of doing business and make New Jersey less competitive to attract and retain businesses,” he said.