The Legislature is considering a measure that would significantly raise the minimum salary above which employers can avoid paying overtime wages to most salaried employees.
Supporters, including labor unions and progressive activists, say the higher threshold is long overdue because the current minimum of $33,000 for certain jobs is too low, while the demands on employees to work longer hours are higher than ever. But business groups and the University of Maine oppose the change, saying it would jack up costs and force employers to reclassify some employees.
Right now, salaried workers who are classified as professional, administrative or executive by their employers, and who earn more than $33,000 a year, don’t qualify for overtime pay, while people in jobs that pay them by the hour do. It’s sometimes referred to as the white-collar exemption, and it affects thousands of workers in Maine who are paid a guaranteed annual salary instead an hourly wage.
The bill, sponsored by Democratic state Rep. Ryan Tipping of Orono, would raise that threshold each year beginning this October until it reaches more than $55,000 by 2022, and then peg future increases to inflation.
Tipping told the Legislature’s Labor Committee Monday that the increase would benefit middle-income workers who are already falling behind because of the growing wealth disparity in Maine and the nation.
“Year after year we are watching people who own large companies get wealthier, while their employees see a comparatively smaller and smaller return on their hard work,” he said.
James Myall, an analyst for Maine Center for Economic Policy, a liberal advocacy group, said right now employers can easily classify salaried workers as administrative or professional even if their salaries are relatively low. He says this is especially true in a modern workforce, where people can earn more than $33,000 a year, yet not qualify for the time-and-a-half wage in overtime pay.
Myall acknowledged that Maine’s exemption law is higher than federal law of about $23,700.
“But our own threshold is still so low that 4 out of 5 salaried workers in Maine earn too much to receive overtime, despite their annual wages not approaching anything that a reasonable observer would consider high earning,” he said.
The Maine AFL-CIO supports the change, arguing that the current threshold forces people classified as managers or professional employees to work longer hours while sometimes going uncompensated for doing so.
But business groups counter that the change is far too dramatic and could force employers to either pay out more in overtime, or raise salaries above the new threshold to avoid paying overtime.
They say the bill goes way beyond an Obama administration proposal to increase the minimum salary to more than $40,000, a rule that was overturned by a federal judge and triggered concerns from independent U.S. Sen. Angus King of Maine that it could hurt businesses in rural parts of the state where the median income is lower.
Curtis Picard of the Retail Association of Maine agrees that the current federal standard is too low, but noted that Maine’s is already higher and set to increase because it’s tied to the minimum wage.
“Where Maine currently is at $33,000, jumping up to $36,000 next year, is probably closer in the range of where it should be. What that exact number should be, I don’t know,” he said.
Samantha Warren, who testified on behalf of the University of Maine, said the bill would make more than 300 of its employees overtime eligible — a fiscal impact of over $1 million. She says the cost would continue to go up as the threshold increases through 2022, affecting more than 940 employees.
“To bring those base wages up to the threshold, it would cost the university $7.3 million in fiscal 2022 alone,” she said.
Tipping said the bill should be amended to address increased costs at UMaine so that it doesn’t force the university to increase tuition.
But Peter Gore, with the Maine State Chamber of Commerce, says the effects would be the same for private nonprofits as well as businesses.
“They’re not the only nonprofit in this state. Where are the other nonprofits to go to to get the money to pay for this? They don’t have the taxpayers any more than, quite frankly, the private employers do, to afford to do this,” he said.
Supporters of the bill say it will affect about 28,000 Mainers, some of whom should already qualify for overtime pay.
The bill has the backing of several prominent Democrats, including Senate President Troy Jackson.
The Maine Bureau of Labor Standards took a neutral position during the public hearing, and the office of Democratic Gov. Janet Mills says she has not yet taken a position.