Incredibly challenging’ for small biz, nonprofits.
When the Obama administration announced it would change the nation’s overtime rules, they were characterized as the right thing to do and long overdue.
But businesses and chambers of commerce in El Paso and across the country are saying that the new rules issued by the U.S. Department of Labor in May – and taking effect Dec. 1 – will hurt both employers and employees.
Basically, the new rules mean that most workers earning less than $47,476 a year will have to be paid overtime if they work over 40 hours a week. That’s twice the current threshold of $23,660, set in 2009.
Put another way, the new rule raises the minimum weekly pay for employees who are exempt from overtime from $455 to $913. That means most salaried workers making less than $913 a week will no longer be exempt if they work over 40 hours a week.
There are exceptions for executives, teachers, doctors, lawyers, computer employees and people who work in outside sales, along with certain other professionals.
The Kemp Smith and Scott Hulse law firms are each offering seminars this week for employers looking for an explanation of the new rules and some advice on how to navigate the changes.
The rules will particularly affect businesses and non-profits with salaried managers and professionals who make less than $47,476 and often work more than 40 hours a week – either because it’s required or they choose to do so.
“In total, the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 million over the next 10 years,” according to the Labor Department.
That may sound good, but it may cost some workers their jobs and mean demotions for others, said Michelle Luevano, business development specialist for the El Paso Hispanic Chamber of Commerce, which polled its members about the changes.
“Almost half of our members said they would have to cut employees’ hours,” Luevano said. “They also stated that in order to make ends meet, they are probably going to have to lay off employees and demote others by taking those employees who are currently salaried and moving them to hourly.”
The Hispanic chamber also asked its members what would have been better than doubling the salary threshold.
“They thought $30,000 was much more reasonable to start off with, or maybe setting it regionally,” Luevano said. “A lot of our members stated that a $47,000 threshold may be reasonable for cities like San Francisco or New York. But for a town like El Paso that generally has lower wages, it didn’t make sense to set it at that level.”
For some businesses and nonprofits, she said, complying will be “incredibly challenging” and they need to start planning now.
“As a nonprofit, it’s definitely going to affect us,” she said. “We’re in the same boat as other small businesses in terms of having to prepare and plan what we’re going to do in six months.”
One El Paso company that’s not worried about the change is JAR Construction, which employs nearly 80 and prides itself on hiring UTEP grads and paying well.
“In this market and this industry, we believe in paying people what they’re worth,” said Angelica Rosales, JAR’s business development director. “You don’t want these students leaving the El Paso area. You want them to stay.”
But she conceded that the jump from paying salaried workers a minimum of $23,660 to having to pay them $47,474 or more after Dec. 1 is a big one.
Going forward, Rosales said, entry-level engineers who started on salary before may have to come is as hourly employees.
The Greater El Paso Chamber of Commerce is also alerting its members about the changes and plans a member survey of its own, CEO Richard Dayoub said.
“This change does have the potential for some very serious ramifications for all employers, large and small,” Dayoub said. “States are considering legal action against the federal government as a result of this.
“The U.S. Chamber of Commerce and Texas Association of Business have come out against the current wording because they believe there are unintended consequences.”
Opposition legislation has been introduced in the U.S. House and Senate.
“It’s important that workers are compensated fairly for their work, but we have to ensure that new rules don’t have unintended consequences,” U.S. Rep. Beto O’Rourke, D-Texas, said when asked for his view of the new rules.
“I come from a family of business owners and understand the unique challenges of making payroll and hiring employees,” he said. “I want to work with the administration to ensure that these new rules help both workers and ensure that small businesses in El Paso remain competitive.”
Local governments aren’t exempt from the new rules.
“We’re actually doing the research right now to find out how many managers and supervisors are working hours in excess of 40,” said Mark Sutter, the city of El Paso’s chief financial officer.
“On initial blush, it doesn’t seem like we have a great deal of change headed our way, but we need to get the facts,” he said. “In some cases, it may be seasonal – like the budget analysts who have a very busy season coming up.”
Scott Hulse attorney Rosemary Marin, who’s board certified in labor and employment law and will be one of the presenters at her firm’s seminar Friday, said there are some tricky aspects to the new rules.
“Say an employer has 45 employees now, and the Department of Labor says in order not to pay overtime, you just have to hire more people,” Marin said. “Well, if you do that and go over 50 employees, you qualify to have to provide health insurance under Obamacare.”
Another example is that of, say, a Dollar Store where both prices and wages tend to be low and managers make far less than the $47,476 minimum for a salaried worker, but they tend to work 50 hours a week or more.
The employer can make some managers hourly and raise a few others above the threshold, who may end up working longer hours than before.
“So, there’s all kinds of underlying issues that employers are facing in the application of the rule that have to be addressed by Dec. 1,” Marin said.