In late June, President Barack Obama announced plans to make millions more American workers eligible for overtime. The administration wants to raise the threshold below which salaried employees are eligible for overtime from $23,660 a year to more than double at $50,400. The White House says the threshold has been updated twice in 40 years and has not kept up with inflation.
The Fair Labor Standards Act of 1938 gives the president the authority to do such a thing. But if the new rules are enacted, companies will have to begin tracking and managing the hours of workers that previously were on a set salary, and paying them accordingly. That can be tricky in the modern world, where hours are flexible and people might work outside the office from their tablets while keeping one eye on their kids’ soccer games.
As Business Report details in the current issue, some local business owners are reluctant to speak publicly about this issue, partly because they don’t yet understand how it will impact them, and partly because they don’t want to give the impression that they underpay their workers or maintain an unfriendly work environment. But business leaders say the burden to implement this plan will be far from minimal.
Dawn Starns, who directs the Louisiana chapter of the National Federation of Independent Businesses, notes that small businesses don’t have big human resource departments, so the heaviest compliance costs will fall on the smallest companies.
She says her members worry about possible changes to the “duties test,” which decides whether a worker primarily performs executive, administrative or professional functions and therefore can be exempt from overtime rules. And it’s likely that at least some businesses will feel that they simply can’t afford to pay their people more, which could lead to eliminating positions or reducing hours.
The White House says that, under the current system, a convenience store manager may be expected to work 50 or 60 hours a week while never seeing a dime of overtime. Critics of the status quo say employers can put, for example, fast food shift supervisors on salary to avoid having to pay them time-and-a-half, even if most of their duties are the same as the workers they purportedly oversee.
“I spent 28 years in the restaurant business,” says Stan Harris, president and CEO of the Louisiana Restaurant Association. “That wasn’t my experience in the business.”
