More workers would be eligible under proposed changes.
More workers would be eligible for extra pay
Baltimore — A store shift manager who supervises workers struggles to pay his family’s bills but doesn’t qualify for overtime after a more than 40-hour workweek.
That’s one example the U.S. Department of Labor is using to explain proposed rules governing which white-collar workers are exempt from overtime pay. The proposal would make an additional 5 million employees eligible, more than doubling the existing salary threshold from $23,660 to $50,440.
“Today, certain professionals and managers are exempt from overtime if they make more than $23,660 a year and perform specific duties,” the agency says on its website. “This is less than the poverty threshold for a family of four. By updating the overtime rules, we’re ensuring a fair day’s pay for a fair day’s work.”
Updates are needed to the federal rule, the Labor Department says, because the overtime exemption for executive, administrative and professional employees originally was meant for “highly compensated” employees, not someone making as little as $23,660. Convenience store managers, fast-food store assistant managers and some office workers are now expected to work 50- or 60-hour weeks without overtime and make less than the poverty level for a family of four, the department says.
But the changes, which could take effect as soon as this summer, are raising concerns among employers and business groups, which argue that costs would be burdensome and could hurt workers’ chances for flexibility, promotions and bonuses. Sectors such as retail, construction and nonprofits are most likely to be affected.
“It is very, very concerning,” said Cailey Locklair Tolle, president of the Maryland Retailers Association. “It’s going to be additional costs to retailers — to businesses, period.”
Groups such as the Society for Human Resource Management have been urging members to look at the proposal and consider how their employees and budgets would be affected. Restaurants might choose to rely on more parttime workers or limit hours, she said.
Businesses also are concerned about a possible change in what is known as the “primary duties test,” raised as a question by the Labor Department but not yet formally proposed. Workers currently are exempt from overtime pay if their main duties are managerial. But under the possible change, known as the California Test, a worker who spends more than half his time on nonmanagerial tasks would be eligible for overtime, regardless of salary.
The human resource group said in public comments to the Labor Department that it supports modernizing overtime regulations but the salary threshold is far too high. And changing the “primary duties test” would be complicated for small employers and those in industries where managers have both managerial and nonmanagerial duties.
“The workplace is changing,” said Nancy Hammer, the HR society’s senior government affairs policy counsel. “We’re encouraging employers to look at whether employees are getting their work done, not how or when employees are getting work done. The concern with this is that employers’ ability to offer flexibility is impacted when employees are nonexempt (or entitled to overtime). Right now, an employee may be able to decide to leave early and work in the evening. They are not tracking that time; they’re just getting the work done.”
She said a technology company told the group that it had allowed employees to take laptops home to complete professional development and certification programs. If those employees were reclassified as nonexempt, the company said it would not be able to afford to pay overtime for that work and might have to eliminate that benefit.
“Small employers may have less of a pot of money that they are distributing between salaries and benefits,” Hammer said. “If more people become eligible for overtime, they may have to make a decision: ’Am I going to cut people’s hours or pay them less so I can afford within my salary budget the overtime they currently work?’ ”
Under the proposed rule, service stations and auto repair businesses said they may be forced to charge customers more, lay off workers, convert full-time workers to part-time or change employees from salary to hourly, which could affect benefits, base pay and flexibility, Kirk McCauley, director of member relations and government affairs for a service station trade group, wrote in a post to the Labor Department’s site.
The rule changes are of special concern to nonprofits. Organizations that serve people with intellectual disabilities, for instance, receive a fixed amount of funding through the state with federal Medicaid matches.