Worker earns $12,320 more than “boss”, despite same hours. Let’s end employers’ abuse of “management” exemption.

The threshold to qualify for overtime pay, now $23,660, is expected to rise to $50,440 a year if new regulations are adopted by the Barack Obama administration. Until now, companies were allowed to call you a manager, pay you $26,000 and require you to work, say, 58 hours a week – no extra pay for hours worked more than 40. This has left many Americans earning far less than the folks they supervised, all just wage slavery for extra time of devotion to the job..

An example is a fast food worker, who earns $11 an hour, which is below the current threshold exemption for overtime (most of these employees don’t even make that much). He is promoted to manager at a salary of $26,000 a year. The job requires him to arrive early, leave late, work an extra day on the weekends, for a total of 18 hours a week, bringing him to 58 hours (not unusual for “junior managers”).

The new manager’s total hours per year are 58 hrs. X 52 weeks = 3,016 hours a year. Even if  paid just straight time at $11 an hour – worker, not manager pay – his annual wages would total $11 X  3,016 = $33,176. That’s $7,176 more than he makes as manager.

Part of the confusion generated by the media (and big business) is that “exempt” workers just don’t receive time and a half for more than 40 hours. In fact, they receive only an annual salary, and no pay over 40 hours.

Should the same manager get the full benefit of $11 an hour with overtime, the gap is even larger. Regular time would be 40 hrs. X 52 weeks = 2,080 regular hours. Then $11 hr. X 2,080 equals $22,880 a year. The 18 hours of overtime each week would be calculated at time and a half or 18 + 9 =27 hours weekly, or 27 hrs. X 52 weeks X $11 an hour, to equal $15,440.

In this example the worker with overtime earns $22,880 straight time, plus $15,440 overtime, for a total of $38,320, or $12,320 more than the manager working the same hours.

No wonder that executives have been pushed by investors to “promote” employees to “working managers” to achieve lower overall labor expense. In the example above, the manager earning $26,000 for 3,016 regular hours plus 1,404 equivalent overtime hours, is really only earning $7.46 an hour, quite a pay cut when “promoted” from $11 an hour to be the “boss.” Talk about “inequality” with a twist!

Next Tuesday: a new meaning for “undertime”