You’d be forgiven for missing this, but later this year — on June 25, to be precise — the Fair Labor Standards Act (FLSA) celebrates its 80th anniversary.
It’s not a birthday party people will be lining up for, but it’s a big milestone, nonetheless, because the FLSA regulates just about every workplace in the US. It’s the origin of our 40-hour workweek, overtime, and the federal minimum wage.
$2 billion in back wages
No doubt you’re familiar with all of that. You may even know the federal minimum wage is $7.25 an hour. But if the FLSA itself is a bit of a mystery to you, you’re in good company. A recent survey found 43 percent of business owners have no idea what the FLSA is. That’s kind of scary when you consider FLSA violations have cost US employers more than $2 billion in back wages and fines.
Given everything that’s going on — or, more to the point, not going on — in Washington, DC, right now, I’m sure the last thing on your mind is the possibility of a minimum wage increase. But according to at least one legal expert I’ve spoken to recently, it’s a possibility.
Should the Fair Labor Standards Act be rewritten?
First, a disclosure: Two years ago, I’d never heard of the Fair Labor Standards Act. I was like the 43 percent of business owners who responded to that survey (except, I’m not a business owner). Which only goes to show it’s never too late to learn, because earlier this month, I found myself hosting a debate between two veritable FLSA heavyweights — Celine McNicholas from the EPI and Ivo Becica from Obermayer.
The question I put to both of them was quite simple: Is 80 years too many?
There would be a good reason to believe so. Back in 1938, when the FLSA was signed, America was still dragging itself out of the mire of the Great Depression. A third of the workforce was unemployed. A third of those who did have jobs worked in agriculture. The federal minimum wage was 25 cents an hour.
They say the past is another country, but this truly was another planet.
And yet, neither Celine nor Ivo will tell you the FLSA has had its day. Granted, it’s far from perfect, but there’s life yet in that old dog.
Woeful neglect
“To me,” Celine says, “the Fair Labor Standards Act is like a great old house with amazing bones that has been woefully neglected … I think you’ll see it updated, but I do not believe that we will ever undo fundamental minimum wage protection in this country.”
Ivo largely agreed with this assessment, adding, “I think the action [updates to the FLSA] will be at the administration level with the courts and with the Department of Labor.” In other words, while lethargy remains on Capitol Hill, the only changes we’ll see to federal labor regulations will have to come through other channels — and this will make it harder for people, employers and employees included, to stay on top of it all.
Celine and Ivo are both attorneys, but they approach this topic from very different viewpoints. Celine represents employees’ interests while Ivo represents the interests of business owners. This isn’t to say these viewpoints are always at odds with each other. They often aren’t, but I was expecting them to disagree more often than they did. In fact, there was a surprising amount of common ground between them, even on minutiae like whether we will see any changes to the FLSA overtime rule.
What happened to the FLSA overtime rule?
Remember that? The FLSA overtime rule? Back in 2016, the Obama administration announced sweeping updates that would have made millions more salaried workers eligible for overtime payments from their employers. (Yes, salaried workers can earn overtime.)
It never happened, of course. The Eastern District Court of Texas blocked the rule change at the very last minute. The news came too late for many business owners who had already raised their employees’ salaries to keep them exempt. The whole charade left everyone scratching their heads. How could such a momentous change be completely derailed at the eleventh hour? And why didn’t we see it coming?
That brings us back to another thing the attorneys agree on: uncertainty sucks.
Bad for employees, worse for businesses
Ivo admits it’s difficult for any legislation to keep pace with innovation. It’s pretty much always going to be being the curve, but leaving it to the “back and forth” of the courts only makes it worse. For everyone.
“The lack of certainty can be a challenge,” he explains. “One of the things that I see from the clients we work with who really want to comply with the law but also manage a successful business is that they want certainty and guidance — from the courts, from Congress, and from the Department of Labor.”
According to Celine, workers also value this certainty, because it helps them to “predict what their wages are and what their working hours will be.” But this, perhaps, is where the arguments start to diverge. “I think a big part of the problem is the rush to the courthouse to stop any kind of meaningful update that may extend protections for working people,” she emphasizes.
Rising minimum wages
So what’s the solution to all of this uncertainty? Action from Congress? Don’t hold your breath. The lack of action is precisely why cities and states on both sides of the country are increasingly taking matters into their own hands, and creating a puzzle of labor laws that keep business owners chasing the unattainable.
“There’s a trend that we see in the wage and hour world because of the lack of changes on the federal level,” Ivo explains, pointing to New Jersey, New York, Oregon, and California as examples of where minimum wages are rising faster than the federal standard.
“Do I see $15 an hour happening at the federal level in the near term?” He asks. “No. But we’re going to reach a point where there has been so much action at the state level that I suppose there could be more political momentum to raise it at the federal level because that groundwork has already been done through state law-making bodies. We’ll have to see.”
Indexed to inflation?
Celine is more upbeat. “I do believe that in the next five years there will be a significant increase in the minimum wage and that it will be indexed … so that every year, workers receive an annual increase that is indexed, whether to median wages or another measure. That is absolutely going to be a component of reforming the Fair Labor Standards Act going forward.”
She adds, “I think that you will ultimately see a correction to some of the exemptions that have occupied a great deal of litigation time and effort, and I believe that the reforms will actually be meaningful.”
But don’t panic. Even if Celine is right about this, major reforms are still likely to be a long way off, if they happen at all. “With everybody running for re-election down here in the House [in Washington, DC] that will mean very little in terms of legislative changes to the Fair Labor Standards Act,” she says.
Not that this would prevent the Department of Labor from revisiting the FLSA overtime rule, a relatively minor reform in comparison to tampering with the federal minimum wage.
Trump-era reforms
If Secretary Acosta does go ahead with the increase to the overtime threshold for salaried workers, as he has hinted he will, it would be very much against the grain of the other Trump-era reforms we’ve seen — such as the decisions to introduce the PAID pilot scheme and to exempt car service advisors from overtime — which have been decidedly more pro-business. Despite this, both Ivo and Celine believe we should anticipate a new overtime rule. Soon.
“I think we will see some sort of overtime proposal come out, most likely in the fall,” Celine says. “Beyond that, I just think that there will be significant reforms in the future but they just may not be in the immediate.”
Do we want a higher minimum wage?
Will the reforms that Celine points to include a minimum wage increase, and if so what impact would that have on the economy? A 2017 survey found 1 in 3 business owners supports a higher federal minimum wage, primarily because it would boost morale, retention, and productivity. But a similar proportion — 28 percent, to be precise — from the same survey said it would force them to hire fewer employees.
The 325 people, mostly accountants, who tuned in to listen to Ivo and Celine discuss the future of the FLSA with me this month had a much more cohesive view. They overwhelmingly supported the idea of a higher federal minimum wage. Will that happen? As Ivo said to me, we’ll have to wait and see.
Watch the full recording of “Is It Time to Rewrite the FLSA?” now.
Simon Worsfold is a writer turned content marketer who works for TSheets. Before diving into the world of timesheets and labor law compliance, he worked in Olympic and Paralympic sports sponsorship in London. @tsheets
