Don’t be an overtime troublemaker
Come the end of the year, businesses around Central Massachusetts and the nation will be forced to adjust to the new realities of the U.S. Department of Labor's standards of overtime pay. The new law says any salaried employee making less than $47,476 annually is now eligible for overtime pay – more than double the old standard of $23,600 per year. The changes are expected to make 4.2 million additional employees eligible for overtime, including 86,000 in Massachusetts.Before the new rules were adopted, business groups across the nation decried the changes, saying it would lead to lower salaries, slower hiring and employee cuts. Labor advocates cheered as – in their minds – the new rules would prevent corporations from working lower paid employees to the bone without ramification. As with all political arguments, the truth lies somewhere in the middle.
The time for debate has passed, and the time for understanding the new law and how it affects your organization directly is upon us. Most businesses will need to do some planning and make some accommodations in order to be ready for the new law. Some companies and workers will have to make hard decisions about what constitutes an hourly employee vs. a salaried employee, but regardless of how that divide is handled, the bottom line is we'll all need to get into compliance.
Regulations like these – and most laws, frankly – over reach and over direct what an employer can and cannot do. Companies with equitable personnel policies have been treating their employees fairly already and will need to make only a few adjustments. Getting into compliance with the new overtime laws will not mean wholesale changes or massive cost overruns – yet another layer of regulatory pain is regrettable.
While most are good actors, the business community gives politicians just enough evidence that a slippery slope in personnel policies exists.
Just this month, Worcester restaurant Shangri-La was cited $11,000 for violations of state wage and hour laws, allegedly for not providing pay stubs and only paying out wages on a monthly basis.
It is announcements like this from the Massachusetts Attorney General's Office that contributes to more burdensome state and federal regulation.
Much has been made this political season of the increasingly sharp divide between the working class and the top 1 percent of wage earners in our society, and the effective stagnation of wages for lower- and middle-class workers in our country. There is also little question that concerns over the expanding gap between rich and poor has driven the big increases in minimum-wage legislation in many states. Politicians can be credited for trying to address that social ill – but implementation of new laws can be sudden shocks to the system for many employers, few of whom are among the very wealthy. Doubling the wage threshold where employees are qualified for overtime pay in one fell swoop is a big change, and implementing a scaled change over a few years would have been less disruptive. However, we're now in the understanding and compliance period, so all employers need to get their heads around the change and sort out any changes they need to make in the next five months.
Our advice is not to over-react to this legislation. Some salaried employees might have to be converted to hourly, and the responsibilities or work flow of others may have to be reorganized. Despite all the doom and gloom rhetoric from business organizations before the change was adopted that the new rules would lead to layoffs and lower wages, the new $47,476-level doesn't change the fundamental equation that employees are compensated for the value they bring to the company and the company's ability to pay those wages. The structuring of how those wages are paid out – hourly vs. salaried; overtime eligible and exempt – is ancillary to the actual compensation.
Yes, these changes will cause some headaches, and the new regulation seems overly burndensome and unnecessary for nearly all businesses.
The point now is, though, that you shouldn't have been the employer forcing the worker making $24,000 annually to work 80 hours per week and now you shouldn't be the employer forcing the worker making $48,000 annually to work 80 hours per week.
That is what makes lawmakers want to raise the exemption even higher, and that shouldn't happen.
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