Minimum wage increase means overtime pay for more Maine workers

December 30, 2019

About 1,600 salaried workers in Maine will be newly eligible for overtime pay under regulations that will take effect Wednesday.

Federal and state laws require that salaried administrative workers who earn less than a set threshold – $33,000 under current Maine law – be paid overtime for hours they work in excess of 40 hours a week. But that threshold is increasing with the new year – in Maine’s case  to $36,000 a year. The rules affect white-collar jobs and also require that workers meet a duties test to make sure that they qualify as administrative, professional or other job classifications under the law.

A proposal that the Legislature may take up in its upcoming session would raise the threshold to $55,224 – above even the level that the Obama administration sought five years ago, which was struck down by a federal judge.

The threshold under federal law is going up Jan. 1  from the current level of about $23,000 – workers who earned above that amount were exempt from being paid overtime. That will jump to about $35,500 on Wednesday, but the Obama administration in 2014 wanted to increase it to about $47,000.

That proposal encountered strong opposition from business groups and a lawsuit by some states. A federal judge in Texas eventually ruled that the administration didn’t have the authority to make such a significant change.

Maine and federal thresholds are different because Maine has since 1999 tied its overtime eligibility to the state’s minimum wage. Under the formula, the minimum hourly wage is multiplied by 3,000 to set the state standard for an annual salary. Maine’s minimum wage is rising from $11 to $12 an hour Wednesday.

Federal levels are determined by the U.S. Department of Labor. Maine wage and hour laws do not cover federal employees, so the slightly lower threshold under federal law will apply to federal workers in the state.

The federal threshold for overtime pay “was definitely not keeping pace,” said Laura Fortman, commissioner of the Maine Department of Labor, who provided the estimate that the higher threshold levels would affect about 1,600 workers in the state.

She said she thinks the change will likely affect positions such as assistant managers in retail and fast food establishments.

Curtis Picard, president and CEO of the Retail Association of Maine, said most businesses in the state see the increase that’s coming Wednesday as reasonable.

Picard said most businesses saw the $23,000 federal threshold as too low, but they will oppose the increase to more than $55,000 in the bill that was carried over in the Legislature. He said if that higher level passed, many businesses would shift pay for employees from salary to hourly pay to avoid having to raise pay significantly to avoid the requirement for overtime pay.

“That’s something that we would be concerned about,” Picard said. A new threshold of over $55,000 would be “absolutely too high,” he said.

The overtime eligibility law dates back to the New Deal in the 1930s and is designed to prevent businesses from classifying employees as administrators and paying them a relatively low salary to avoid paying higher hourly wages for overtime work. Most administrative and professional workers aren’t compensated for overtime they work as long as their salaries are above the threshold.

Maine voters in 2016 decided to increase the minimum wage from $7.50 an hour to $12 an hour in 2020. After that, it will rise annually based on the increase in the cost of living. The federal minimum wage has been set at $7.25 since 2009.