A bill pending in the Legislature would add Maine to a handful of states that mandate overtime pay for many workers earning middle-class salaries.

Salaried, professional workers do not earn overtime after working a standard 40-hour work week unless they earn less than the annual threshold, which is about $38,000 this year. Under the proposed legislation, that salary cutoff would increase to more than $57,000 within three years.

Supporters of the bill say raising income standards protects workers from long hours of unpaid overtime. Salaried overtime has been in effect for decades, but income thresholds have not kept pace with inflation, allowing employers to overwork relatively low-paid salaried workers without compensation, they argue.

But a coalition of pro-business and trade groups staunchly opposes the bill. Maine’s overtime threshold is already higher than the federal limit, said Peter Gore, executive vice president of the Maine State Chamber of Commerce. Increasing the threshold would force employers to revert salaried workers to an hourly wage, raise business costs and make Maine less competitive, he said.

“Right now, Maine wants to attract new jobs, new opportunities and new investments in the state,” Gore said. “If we have a salary threshold that is completely different than the rest of the country, what does that mean for those efforts going forward?”

SPONSOR DECRIES “EXPLOITATION”

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The bill, L.D. 607, was endorsed by the Legislature’s Labor and Housing Committee on a party-line vote last week, with committee Democrats supporting the measure. A similar proposal failed to gain committee support two years ago. The proposal is reminiscent of an Obama-era reform for salaried overtime that was blocked in the courts and eventually replaced with a much lower threshold during the Trump administration.

“We need to take action now to protect workers in Maine who are not being paid for their labor,” said Rep. Rachel Talbot Ross, D-Portland, the bill’s sponsor. “This is the heart of the bill – that we honor the number of hours they are working with compensation. Otherwise, it takes on an ugly form of labor exploitation.”

The threshold for salaried overtime in Maine is $38,250 this year, which is 3,000 times the state’s minimum wage. That works out to roughly $18 an hour, just below the state’s median wage for hourly workers.

Under the bill, that calculation would increase every year to 4,500 percent of the minimum wage by 2025. By then, salaried workers earning up to $57,375 would be entitled to paid overtime.

Maine is among a handful of states that calculate their salary thresholds above the federal standard of $35,680. Raising overtime standards would group Maine with eight states that have similar laws, from Pennsylvania, where the threshold is about $40,600, to California, where the cutoff for large employers is $62,400.

“We would be ahead of other states, but we wouldn’t be leading the way,” said James Myall, a policy analyst at the left-leaning Maine Center for Economic Policy.

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About 30,500 salaried workers would be newly covered under the salary rule by the time it hit the maximum threshold, Myall said. Roughly 8,300 of those employees regularly work more than 40 hours per week, he added.

“I don’t think of it (as being) as big a deal” as opponents make the proposal out to be, Myall said. “It is a relatively small amount of people who are covered by this law.”

LOST OVER TIME

In the 1970s, the federal overtime standards covered more than 60 percent of salaried employees, but that number has diminished to about 20 percent of such workers. Upgrading overtime thresholds would help prevent employers from creating nominally “managerial” positions such as assistant or deputy managers that receive relatively low pay but may have to work excessive overtime, Myall said.

“For a long time, people just assumed that if you got salaries, you didn’t get overtime,” he said. “There is nothing stopping people from keeping employees’ salaries and titles; they just have to keep track of their hours and pay them overtime.”

Federal labor law requires a three-pronged standard for an overtime-exempt employee. Workers have to be salaried, be paid above the overtime threshold and have administrative, professional or executive job functions, also known as a duties test.

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“Generally, this includes whether that worker oversees other full-time employees or directs a division or department or has responsibility for hiring and firing other employees,” said Maine Department of Labor spokesperson Jessica Picard.

At a public hearing in March 2021, more than a handful of employers and about two dozen trade associations and pro-business groups testified against the bill and warned of grave consequences if it passed.

Companies said employee benefits would have to be cut back to afford the added cost, or currently salaried employees would need to be converted to hourly workers and would lose flexible schedules and consistent pay.

SERVICE OR DISSERVICE?

If passed, the bill would affect at 50 to 100 employees at Spectrum Healthcare Partners, a statewide medical company headquartered in South Portland.

Some of those workers are definitely in supervisory roles, and some are in “senior provider positions” – physician’s assistants or others who typically receive a salary instead of hourly wages, said Spectrum CEO David Landry. Most of those staff work 40 to 50 hours a week, he said.

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“For us to be sustainable, if we have to pay at those higher levels, we have to reduce other expenses, we have to reduce benefits packages,” Landry said in an interview. “It puts us at a competitive disadvantage to other organizations (recruiting nationally).”

Jamey Kitchen, director of operations at Maine Course Hospitality Group, said the bill would “kill many (if not all) middle management salary jobs, turning them into hourly roles,” in testimony submitted to the Legislature last year. Changing the overtime rules would affect about 35 of the hotel management company’s 400 employees, Kitchen estimated.

“I don’t believe they are doing a service to front-line managers by trying to do this – I think they are going to do a disservice to them,” Kitchen said in an interview.

Despite objections from businesses, Democrats on the Labor and Housing Committee voted to endorse the bill and send it to the full Legislature for a vote later in the winter.

Committee Co-Chair Sen. Craig Hickman, D-Winthrop, said standards should be increased, and workers should be made aware of their right to overtime pay.

“If someone works 70 hours a week and doesn’t know if they are qualified for overtime or not and do not keep track of their hours, they are being underpaid,” Hickman said. “What that really is is wage theft, and that is exploitation of labor in the true sense.”

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