Lynchburg-area businesses prepare for new overtime rules
Posted: Monday, August 15, 2016 2:00 am
Starting Dec. 1, some employees might become newly eligible for overtime pay.
The current rules require overtime pay for employees who make less than $23,660 ($455 per week) per year. For those in that income bracket who work full time, they earn time-and-a-half for all the work they do once they work more than 40 hours. The new regulation more than doubles the benchmark for mandated overtime to $47,476 ($913 per week).
Under the Fair Labor Standards Act, employees are exempt from overtime if they are both a salaried employee and work in an executive, administrative, professional, IT or in an outside sales capacity. By raising the salary requirement for overtime, the regulation is expected to affect more than 4 million workers in the first year of implementation, according to the US Department of Labor.
Department of Labor statistics show 2.3 million — more than half — of the employees gaining overtime privileges are women, a group who traditionally earn lower wages than their male counterparts.
Roanoke Labor and unemployment lawyer Paul Klockenbrink said the regulation will affect certain sectors more heavily than others, with mid- and lower-level management employees taking the brunt of the changes.
“Certain industries will be hit harder than others, mostly colleges, retail and nonprofits,” Klockenbrink said. “They’re obviously going to have to start getting their management educated on the rule and start tracking hours.”
Abe Loper, owner of The White Hart Cafe in downtown Lynchburg, has three salaried managers that will be affected by the new rule. In order to comply with the new federal rules, he is choosing to move his employees to hourly pay.
“Unfortunately, this means that these staff members will earn less money during our slower weeks than they would have during the same week had they remained salaried workers,” he said. “The end result is that they will probably not have to work as many hours as they used to, but they will also very likely not make as much money as they used to.”
Companies will have several options in order to comply. They can raise their employees’ salaries above the threshold, keep their hours below 40 or track their hours and pay them the extra salary. According to Klockenbrink, companies will need to be diligent about making sure employees are aware of the changes and push for increased productivity.
“They’re going to need to revise their policies that make it clear if an employee is working beyond 40 that they are reporting those hours, because you’ve got to pay them no matter what,” he said. “With these people that are now non-exempt, you’re going to have to hold their feet to the fire and make sure they are efficient with their time.”
The new regulations set the salary threshold equal to the 40th percentile of weekly earnings for full-time salaried workers in the Southeast. This region has the lowest wage increases in the country, according to the Department of Labor. The use of this region as the benchmark is troubling to the U.S. Chamber of Commerce.
“The Southeast includes the lowest wage increase; however, it includes [Washington] D.C. and Maryland, which is like a different state, and it has some of the highest wages in the country,” Clark Thomasan, U.S. Chamber of Commerce manager of congressional and public affairs for the Southeast region, said at a recent breakfast event held by the Lynchburg Regional Business Alliance to inform employers of the new rules.
“Including those increases the entire wage level quite a bit.”
On the other hand, Economic Policy Institute Vice President Ross Eisenbrey believes the rule will boost the economy and help workers.
“Businesses have gotten used to the idea that they can work people 50 to 60 hours a week without paying them,” Eisenbrey said. “You can see how a business would make money doing that, but it’s just wrong. I think it’s immoral to work people that hard without compensating them for it.”
Built into the new rule is an automatic evaluation of the salary threshold every three years. For local Society for Human Resource Management President Connue Burnette, this is an area of concern.
“Who knows what it is going to look like every three years? Where is the cap going to be? Where is it going to stop?” she asked. “This creates a lot of uncertainty for companies.”
According to Thomasan, the US Chamber of Commerce agreed it was time to raise the salary threshold, but the chosen number is much too high and will cause employers to have to make tough decisions.
“From a business perspective, the burden is very high,” she said. “Businesses are set to face 3 billion dollars in compliance costs and over 2 and half million hours of paperwork. Employers are going to have tough choices on behalf of their employees and many cases the workers will suffer the most from this change.”