Obama’s new overtime decree

by Walter Olson on March 13, 2014

Here comes a more regimented, polarized, lawsuit-ridden workplace with less upward mobility — at least if the President gets his way. I deplore some of the likely effects, unintended or otherwise, in a new Cato post: “Increasingly, Obama’s binge of executive orders and unilateral decrees to bypass Congress is coming to resemble a toddler’s destructive tantrum.” More: Daniel Schwartz, Daniel Fisher. Our wage and hour law category has more than 80 posts.

More from Scott Shackford, Reason, from Brett Logiurato at Business Insider on organized business opposition, and from the WSJ. And from George Leef, John Locke Institute:

The Fair Labor Standards Act is the federal statute that imposes the minimum wage along with other intrusions into what ought to be matters of contract between the parties.There is no real constitutional authority for the federal government to dictate the terms of labor contracts. During the New Deal, Congress relied upon the notion that if anything might have any possible effect on interstate commerce, then it’s fair game for federal control. That idea stretches the concept of interstate commerce far beyond its intended meaning.

Yet more: Welcome Andrew Sullivan, Washington Times readers. And see followup post (why this could do much more damage to economy than minimum wage hike)

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1 Allan 03.13.14 at 3:36 pm

Let’s get past the libertarian talking point of constitutional authority pertaining to the commerce clause. Three branches of government think there is such authority. That is what carries the day. Frankly, I am more worried about the authority for Roe v. Wade and Wickard v. Filmore than I am over the authority to set a minimum wage. This is a theoretical argument that has no possibility of succeeding at this time.

The real problem conservatives seem to have is that it is wrong to assess a minimum wage. They think we should let the markets decide. That is a viable argument. But the conservatives lost on this point. You see, Barak Obama is president.

From my point of view, if the country wants to set a policy that dictates wages employees must pay, it can do so. I think there is a definite public benefit to having happy, well-paid employees. There is also a public benefit to have thriving business that are not throttled by expensive mandates. We have to draw a line somewhere between no-one gets overtime at all and everyone gets overtime regardless of position.

2 Ron Miller 03.13.14 at 3:58 pm

Without tackling Allan point, which I agree and disagree with, why would this create a more polarized workplace? As long as you draw the line someone, there is always going to be a gray area. Or am I missing something?

3 Walter Olson 03.13.14 at 4:14 pm

Ron — Endeavoring to proletarianize junior managers, and get them focused more on watching the clock than on acquiring skills for upward mobility, might not in itself perhaps polarize the workplace. Arranging things so that managers are forbidden to pitch in to help line workers by filling in for them on break or helping them when they fall behind at a busy point is, I think, well calculated to worsen us-and-them workers-vs.-management polarization, especially since line workers may not realize why the manager is buffing his fingernails rather than jumping in to assist with an unmet task.

4 ras 03.13.14 at 5:20 pm

Here comes a more regimented, polarized, lawsuit-ridden workplace… which will therefore require more top-down adjudication from a correspondingly more powerful bureaucracy, more profitable lawsuits from donors to the govt, and further entrenchment of the status quo for those already in economic power.

And that’s presuming even-handed enforcement, ha ha.

5 gitarcarver 03.13.14 at 10:12 pm

This site once recommended the book “The Right To Earn a Living” in which the author takes a look at the history of government intervention (some would say “meddling”) in what is essentially a contract between an individual and a company.

(The book is good, BTW, and is well worth reading.)

While I agree that the government should not have a say in the contract between the employee and the employer, shouldn’t the employee have the guarantee that the employer will live up to the conditions of hire?

If I hire a salaried employee and tell him that he should expect to work 40 – 45 hours a week, should I be able to demand that he consistently work 50 – 55 hours a week simply because he is “salaried?”

If a employee is told they continually work outside of the terms of hire without any compensation, that bothers me. The employee has no real options but to quit. He really cannot hire a lawyer because the money he will get back if he wins (assuming he can win) won’t even pay the laywer’s fees.

I am just not thrilled with the idea that an employer can basically hold an employee hostage and because of the longer hours, prevent the employee from taking up interests (even another job) that he could otherwise pursue.

If we hold employees to standards of showing up on time, dress, conduct, etc., and demand they fulfill their end of the employment agreement, then we should demand that companies fulfill their end as well.

6 Walter Olson 03.13.14 at 11:44 pm

In an employment at will situation, the remedies for breach of the mutual obligations are in fact symmetrical. If the employee promises to show up on time or dress neatly and then does not, the employer’s remedy is to end the relationship. If the employer promises that the salaried position won’t require much weekend work but it does, the employee’s remedy is also to end the relationship.

7 DensityDuck 03.14.14 at 3:32 am

The thing is, this “binge of executive orders and unilateral decrees to bypass Congress” is how most people think government actually works. The idea that all this stuff is supposed to come from Congress is, like, what? 535 old farts have to agree on something before we can make a law that, like, rapists should go to jail forever? Dude, that takes too *long*. And I didn’t vote for, like, any of those dudes, I voted for Barack Obama, why can’t he just like say what the law is? Isn’t that what the President, like, is supposed to *do*?

8 No Name Guy 03.14.14 at 11:33 am

Alan said: “Let’s get past the libertarian talking point of constitutional authority pertaining to the commerce clause. Three branches of government think there is such authority. That is what carries the day.”

Response: At one point in time, three branches of Government thought separate but “equal” was within the authority of Government. It wasn’t and never was, going against the inalienable rights of man that we are born with.

The above illustrates the laziness in the lawyer profession with respect to the concept of stare decisis. It lets bad decisions stand on the faulty theory of “oh, that was already decided….no need to go look at that again.”

Your argument Allan is to stop trying…..nay…..when something is wrong, you fight even harder.

9 Allan 03.14.14 at 3:53 pm

No Name Guy,

Seperate but equal died when we got enough people to elect leaders who thought it should die (and appoint judges who thought the same).

I did not say that you should stop the fight. What I said was that, with the government we have now, constitutional arguments are worthless.

I believe that overruling Wickard would cause an incredible upheaval. And I would predict that doing so would horrify the business community. There are a bunch of laws benefitting businesses that are on tenuous constitutional grounds. Do you really think that businesses prefer to deal with 52 different sets of laws (50 states, DC, and federal), rather than one?

10 rxc 03.15.14 at 10:50 am

@densityduck: It seems like you and a lot of Democrats thought they were electing a king when they voted for Obama. They just ignore the rest of the representative government that they voted for (or against). Why do Democrats seem to be such big believers in strong-man government? Or is this belief only applicable when their man is in power? (remember Richard Milhous Nixon?)

And, I thought Obama was a professor of constitutional law, but he seems to have bought into the banana republic form of government as well.

11 Ron Miller 03.19.14 at 3:14 pm

Lots of comments… sorry I left.

Will a lawsuit be filed arguing that Obama overstepped his authority? If not, why not? This “Obama is acting like a king and no one can stop him” leitmotif is silly. The folks who dislike Obama are doing everything they can to stop him. These are powerful, smart people with lots of weapons at their disposal and a Supreme Court with a slightly conservative bent.

Stare decisis is an extremely conservative legal doctrine. Lawyers who are opposed to primacy of this theory are to the left of Obama. So it is funny to hear it used to defend such a conservative theory.

Walter, I still feel like wherever you draw the line you are going to risk the problem you describe. We already have a line and I don’t think it is a big problem in the workplace now. We are not talking about adding a line. Just moving the one we have now.

“Frankly, I am more worried about the authority for Roe v. Wade and Wickard v. Filmore than I am over the authority to set a minimum wage.” Does anyone really disagree with Allan’s point here?

“In an employment at will situation, the remedies for breach of the mutual obligations are in fact symmetrical. If the employee promises to show up on time or dress neatly and then does not, the employer’s remedy is to end the relationship.” I agree with Walter here. I think it is crazy to suggest the employer must honor the terms originally agreed to. The employer changes. The world changes. It learns more about the employee. Having to stick to the deal when you hired someone could not even gain much traction among hard core liberals.

12 gitarcarver 03.19.14 at 6:09 pm

I think it is crazy to suggest the employer must honor the terms originally agreed to.

God forbid that people abide by agreements?

Yes, things change in an employer and employee relationship but those changes are usually mutually agreed upon or either party may end the relationship prior to the new changes being put into place.

Say that a person is hired on a salaried basis and is told they will work 45 – 50 hours a week. For the next 4 weeks, the employee is forced to work 55 – 60 hours at which point the employee says “I quit.”

While some may claim there is a “symmetry” to the relationship, I can find no symmetry in the employee being forced to give the employer a weeks worth of work for no compensation. If there were actual symmetry, the employee would either get the money or the time back but neither is going happen. The employer is enriched and the employee, who could have spent the time making money elsewhere, being with his family or whatever, is left out in the cold.

I find it disconcerting on some level that people are saying the agreement of “I’ll pay you this amount and in exchange you work this number of hours” doesn’t mount to a hill of beans.

13 Ron Miller 03.20.14 at 10:29 am

Employers have to make their employees happy or they will leave. Employees have to make their employers happy or they will be terminated or will suffer in terms their salaries or the conditions of their employment. The free market economy fails sometimes in some places. I don’t think it fails here.

But very definition, an at-will employment contract has no agreement. So there is no agreement to abide by.

When I was a young associate in a law firm, there was always a big thing about salaries. Were we keeping up with Firm X? Did we have to work more hours than Firm Y? I never understood the logic. I always figured they should pay me whatever they want and make me work as much as they want. I should leave if I could do better. That is how the world works and this is, in my opinion, how the world should work.

Even if this utopia of “I got what I was told” was desirable (1) how would we decide what the original agreement was? and (2) what remedy would employees have when the deal was breached? Everyone here complains incessantly about the volume of litigation. Employment cases are a huge part of that. If a rule like this was promulgated, we have have today’s employment litigation squared.

14 gitarcarver 03.20.14 at 2:07 pm


I understand what you are saying. I really do. But according to your logic aren’t you saying that as there is no “agreement,” if a hourly wage employee agrees to work for $20 / hour and when his paycheck arrives it is for $8 / hour the employee should have no recourse other than to walk away? The time and effort he spent working under one understanding means nothing?

Why should it be that a person who works for a salary based on x number of hours worked be treated differently than a person who works for y dollars an hour? Aren’t both pay scales based upon the terms of hire?

As a hypothetical, let’s say that you are asked to teach at XYZ University for a year. You know going in that the gig is only for a year because the well thought of professor is out for a year and is coming back. The University tells you that you will be paid x dollars for y number of classes of z length of time.

At the end of the year, when it is time to settle up or at the end of a pay period, you get a check and it is short according to the agreement / understanding with the university.

Are you saying that your only course of action is to walk away? That the University should be able to short you or keep the money that you agreed to?

Or how about the fact that health insurance benefits are considered compensation and you agree to take a position that has bennies for your family. Your child gets sick and when she goes to the hospital, there is no coverage because the company didn’t live up to the terms of hire and pay for insurance. Are you saying that there should be no recourse for you? That you are stuck with the hospital bill because the employer did not live up to their part of the employment agreement?

I don’t think I can go with that.

15 Walter Olson 03.20.14 at 2:43 pm

Not to intrude, but I believe the uncontroversial answer is that if the worker has agreed to work at $20/hr the employer is liable for that full $20/hr when paying for any work already done. Does anyone at all disagree with that? I don’t know of anyone. The only debate would be over how severe the punishment should be for shorting the paycheck (jail, or back pay plus attorneys’ fees, or something in between?) The more salient question is what happens if the employer says on Friday afternoon, “here’s your paycheck through today at $20/hr, but starting Monday I’ll be cutting your pay to $8/hr.” That’s the situation I thought you and Ron were discussing.

16 Walter Olson 03.20.14 at 2:46 pm

Also, an employer that deceives its workforce into believing that it has paid workers’ comp, unemployment, or health insurance on their behalf, but has actually not done so, is treated quite severely under law and properly so. No libertarians I know of would treat that as other than a serious breach of civil obligation for which there should be strong remedies.

17 Ron Miller 03.20.14 at 3:50 pm

Right. Maybe we are all saying the same thing here. Clearly, you can’t tell someone that you will pay them a certain amount and then pay them a different amount. You are right, your professor scenario would be awful as would be your insurance scenario and both would be actionable.

18 gitarcarver 03.20.14 at 10:33 pm

Ron and Mr. Olson,

From your most recent comments, it appears that we all agree that there is something to this “terms of hire” agreement between the employee and the employer.

We all agree that when it comes to stated compensation and benefits the company not living up to the agreement is actionable.

Where the sticking point seems to be is that I believe that when a salaried employee is told “you’ll work x number of hours,” and is forced to work “x + y” hours, I don’t see that as any different than the pay / benefits part of the hiring agreement for an hourly employee.

By making the salaried employee work more than is agreed to, the company is effectively cutting the wages of the employee.

I have understood the point that the employee can always walk out the door in the “symmetrical” relationship as Mr. Olson describes it.

However, unless I am misunderstanding ya’ll, it seems that you are saying that when the hourly employee finds out he is being shortchanged in pay, he not only can walk, but seek legal redress.

Yet the salaried employee, facing the same effective shortchanging of pay can walk out the door but has to suck it up when it comes to the loss he suffered.

I am not trying to be argumentative and (this is directed more toward Ron,) I appreciate the tone of the conversation as you and I have a bit of a history I would like to get past.

The conservative part of me (ideologically speaking) hates the idea that an employer can shake the hand of a new employee and not live up to the agreement if the employee fulfills their end of the bargain. I am having trouble understanding why the agreement on compensation is actionable when it comes to a hourly wage employee but when it comes to a salaried employee, they are treated as if the agreement never existed.

My whole point has been that when it comes to the compensation / hours worked part of any initial agreement between employer and employee, they type of employee should not matter. Whether the employee is hourly or salaried, the agreement still stands.

Finally, and this is where there is a lot of grey, I understand that there are going to be times when a salaried person may be asked to work more than the agreed upon hours. But I have seen and known too many people where the number of hours demanded by companies of salaried people consistently go so far and beyond the agreed work hours that it cannot be anything other than planned and systemic.

I just am having a hard time figuring out why an hourly employee cannot be shortchanged when it comes to compensation / hours yet a salaried person can be shortchanged when it comes to compensation / hours worked.

Once again, thanks for listening and the tone of the conversation.

19 Walter Olson 03.20.14 at 10:43 pm

I really don’t think it’s that complicated. Again, if the two sides agree on a deal of $400 a week with an agreed-upon work week of 40 hours, and on Friday afternoon at 5 p.m. the employer says “yes, you’ve worked the 40 hours, but you can’t have the $400 unless you come in Saturday and work five more hours,” the employee has a right to say, “Forget it, bub” and collect the full $400, with stringent legal penalties to the bad employer if it doesn’t cough up at once. On the other hand, if the employer says “Here’s this week’s pay in full, but next week you’re going to have to start working Saturdays too and I’m not going to raise your wage,” no one has legally injured anyone. The worker can quit, or can accept the new deal going forward, which re-forms the contract at the new terms.

20 DensityDuck 03.21.14 at 3:12 am

gitarcarver: You need to read up on the concept of “salaried non-exempt” before you start trying to have this conversation.

To sum up: Most American workers are in a category where they don’t have set hours. There is no “you’ll work x number of hours” agreement for them, at least not in any legally-binding sense. So if they work “x+y hours”, well, that’s just how many hours they work.

21 Ron Miller 03.21.14 at 9:47 am

While we are playing all nice and all, I’m not unmindful of your point Git. I think your heart is in the right place on this one. In some bigger sense of the word, when the employer tells you that you can work under these terms of employment and then switches those terms, the employee gets wronged in the ordinary sense of the word.

I can prove this. If Cato calls Walter today and say, oh, by the way, we also need you to staff our “Convert to Libertarian” effort by handing out flyers at BWI airport every Sunday, we can all agree that Walter was wronged.

The question is whether that “wrong” should be actionable. That question, in my mind, hinges on whether the free market adequately addresses this problem in a macro sense.

I think it does. Walter has the option to leave Cato go think tank and write for someone else. (I have it on good authority that he sends a resume to the Daily Kos on a weekly basis just in case.) The employer is also motivated to not mistreat its employees like this because in the long run they will leave or become disgruntled and that is not a paradigm to maximize profits. So while there are individual wrongs that occur, the marketplace keeps those wrongs relatively limited which is why we have at-will employees in the first place.

I think, as a practical matter, people often stay in jobs they don’t want where they are not being treated well because they are comfortable and don’t feel like putting out the energy to get another job. I had an ex-girlfriend years ago who hated her job with an unmatched passion. Yet she was not even looking for a new one. She was a very sane person but she preferred the awful bird in the hand to the two in the bush. So it is not irrational. But we probably should craft laws to protect people who won’t make the effort to do what’s best for them.

The other option, of course, is that you don’t have to be an at-will employee. The employee can demand an employment contract if the market demand for that employee give him the leverage to make that kind of demand.

22 Melvin H. 03.30.14 at 3:41 am

Somewhat on the same subject, at what point is an employee on 24/7/365 availability for being called-in by management? Someone gets sick or is on vacation, you’re first in line to keep getting added hours on what normally is your off-days. Should an employee start getting paid for, in effect, being “on stand-by”/”on call”, and at what point can the employee say “no more, I can’t do it” without being penalized?

23 Melvin H. 03.30.14 at 3:47 am

And on a slightly different subject: Using the cases of the two Denver Bronco front-office men who were suspended for drunk-driving–one for 30 days, one indefinitely; neither AFAIK came in drunk to their jobs or team/NFL functions–at what point is an employee “off the clock” from his/her job, or are they always “on the clock”, and should be compensated as such?

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