Starting Dec. 1, people earning salaries of $47,476 or less must be paid time-and-a-half for every hour they work over 40 in a given week. The new law applies both to private businesses and such public or nonprofit agencies as schools or community benefit groups.
Thus an employee making a salary of $38,400 per year, for example — $20 per hour for 40 hours in each of 52 weeks — would be paid $30 per hour for 10 hours, or $300 additional dollars, if he or she worked 50 hours in one week.
“It’s going to be a significant change for employers and employees. Whether that’s a good thing or not (for the U.S. economy) remains to be seen,” says Suzanne Boy, a west coast Florida labor attorney and employment law expert at Henderson-Franklin, based in Fort Myers. Her blog explaining the effect of new laws on employers can be found at swflemploymentlawblog.com.
Employers now face a range of complicated questions and in many cases new obligations, she notes. For example, they will need to put on the clock those salaried employees who sometimes work less than 40 hours or more than 40 hours.
About workers earning salaries relatively close to the threshold, Ms. Boy adds, “employers are asking, ‘Do I bump these people up to more than threshold, do I pay them more overtime, do I reduce their hours?’ It’s going to be an interesting change over the next six months.”
The threshold for the new pay requirements roughly doubles the previous salary standard of $23,660 or less, created in 2004. The rules are based on a 1938 labor law, established under President Franklin D. Roosevelt, that also exempts workers from the requirement only if they’re classified as managers, administrators, executives or professionals.
The number of workers likely to be affected is uncertain. The U.S. Department of Labor, which will enforce the law from its local or regional offices by inspections of businesses, says about 4.2 million workers are likely to be affected. But the Economic Policy Institute puts the number of people who might qualify for overtime pay under these rules at 12.5 million.
The EPI also indicates that if the figure had been adjusted for inflation, the new threshold would be $52,000. Instead, according to the Labor Department, the new figure, set to be updated automatically every three years to maintain the new level of pay, is based on the 40th percentile of weekly earnings for people making salaries in the U.S. Census region with the lowest wages — the South.
“We do have a problem with income inequality, with the fact that the middle class hasn’t seen an increase in wages for 20 years or more. So you’d expect the government to do this kind of thing,” he explains.
“But the best way for businesses to look at it might not be just to blindly fight it. Yes, anytime you force a business to pay against its will, there will be some negative impact on the business.
Then it’s a question of the circumstances of the business and how owners deal with it — change the number of workers, raise prices for consumers, change technology?
“But some businesses find when they don’t pay above the basic minimum they have high turnover rates, so they’re continually training new people — and that might be more costly than paying more in the first place.”
One business owner now trying to embrace the new rules, at least in principle, and working to understand how they might apply to his own enterprise is Will Prather, owner of the robustly thriving Broadway Palm Dinner Theatre in Fort Myers.
“From a theater standpoint we’re going to be OK — it will have a minimal impact,” he says. “The most shows we’ll ever do in a week is nine, and a musical takes between 18 and 22 actors, normally, with a couple of stage hands and a live orchestra of four to five instruments — so my staff of 25 or 26 might do 36 hours a week.”
But on the technical side — the nonperformance side — people can go over the limit, with 60 hours a week sometimes to get ready for a show and do it.
Mr. Prather’s scene shop is in Pennsylvania where his father originally founded the family business, and where many workers, some of them salaried with annual pay, must sometimes work feverishly and for long hours to create a new set, but other times find themselves in rather languid down periods, he explains.
At the moment, they’re working to build an elaborate set for the musical “Mary Poppins,” and that will most certainly require a more than 40-hour-per-week effort from some.
Many of those workers, however, are already paid at higher than the $47,663 threshold, so he won’t have to worry about changes for them, he says.
Finally, there is Mr. Prather’s significant and important sales staff — and for them and everybody who might be affected, “my CFO has been pushing me to get us on the clock,” he says.
“I support the new rules in principle but for the sales staff, what about when they go to social mixers or business expos, are they on the clock? What if some of my managers like to work from home? Or respond (at all hours) in emails or text messages — is that on the clock?
“I think there will be some sorting it all out … but I do not see in my organization this having adverse effects on employees and managers.”
That may not be true from the viewpoint of Angela Hogan, director of the Charlotte County Homeless Coalition, who has a staff of 26 but only a few who might be affected. Still, a key few, she says.
“Some of my staff are right on the edge, and if I give them a small raise they can be exempted, so it would affect them positively. But others could have to be made hourly employees, and that might affect them negatively,” she explains.
“Among the nonprofit community there’s been a lot of conversation about it, much of it very negative. The benefit to being on a salary, for me, is there are some weeks where you don’t work 40 hours. There’s flexibility in that. And there are some weeks you need to do more, but it’s about getting the job done. My staff understands that, so there’s flexibility around those weeks where things are slower and quieter.”
Other benefits Ms. Hogan points to include additional vacation or sick days, or people making their own schedules and appointments and not recording every detail of time spent working.
One the biggest headaches Ms. Hogan may face is planning, she acknowledges.
“At some point I have to have a conversation with the board. Because we can’t afford to have fluctuation as a nonprofit. Our state and federal contracts don’t allow us to change our contracts after they’ve been established. Instead, we have to tell them a year in advance what we’ll pay.
“So, if I have no idea how much a job will require a year in advance, I have to make guesses.”
Her conclusion: It’s unfortunate that some people abused the system so all the others are forced into a new way of doing things that might not be practical.
“I think it’s meddling, overreaching,” she says.
In the eyes of the labor attorney, Suzanne Boy, the new law sounds impressive in the headlines, but it may be different in the reality.
“The headlines are, ‘4 million people entitled to overtime pay!’” she explains. “But the reality is they’re going to be creative about how to continue to perform work for the same amount of pay. Whether they come up with overtime and hourly time adjustments as before; whether they keep a formerly exempt person at 40 hours, or hire other people to do the work on a consulting or hourly basis, they’re going to find (workaround solutions).”
In any case, she concludes, “there won’t be this switch in which 4 million suddenly get paid overtime.” ¦