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August 29, 2016

Businesses jumping through new OT hoops

Dee Sendrowski, human resources director at Fidelity Bank, which has a new online tracker for employee hours.
PHOTO/COURTESY Deana Tuefferd, president of Westborough-based CMEA Employers Association, has put on educational sessions throughout the summer to help Central Massachusetts employers figure out how to best adjust to the new overtime-exemption rule.

With the new federal overtime pay rule set to take effect Dec. 1, Central Massachusetts businesses are educating themselves, planning changes – and offering opinions.

Some say the new standard, where salaried employees making less than $47,476 per year will be eligible for overtime pay, is too much too soon. The new pay point is more than double the previous figure of $23,600 in annual salary,

And unlike other state and federal mandates which are phased in over time, this one is happening all at once.

“It's a 100-percent increase. That's a lot to knuckle in one year,” said Stuart Loosemore, general counsel and director of government affairs and public policy at the Worcester Regional Chamber of Commerce. “We're all for good wages for a hard day's work, but a 100-percent increase is hard for businesses to absorb, and it lumps a lot more workers into it.”

The Worcester chamber plans an informational seminar on the new overtime-exemption law this fall; the MetroWest Chamber of Commerce and CMEA Employers' Association held educational sessions on the new rule earlier this summer.

Nationally, 4.2 million more workers will be eligible for overtime, about 86,000 of them in Massachusetts, according to the U.S. Department of Labor. Concerns for lower-paid employees working more than 40 hours – sometimes way more than 40 hours – for no additional pay spurred the new exemption rules.

Some of the ways area employers can comply with the new law is to convert salaried employees to hourly workers; give raises to affected employees to get them above the pay threshold; or to institute new timekeeping measures to ensure newly non-exempt team members aren't working off the clock.

Labor-relations expert Timothy Murphy, a partner at Worcester law firm Skoler, Abbott & Presser, said industries with disproportionate numbers of lower-paid workers like retail and restaurants and social service agencies will be most impacted.

Yet, area business owners – even in those industries – don't envision the new rules don't necessarily meaning major business modifications for compliance.

System upgrades

Maintaining employee morale might be more difficult in light of the new law, said Dee Sendrowski, human resources director at Fidelity Bank.

“The age-old notion that salaried roles carry more prestige is definitely still present,” said Sendrowski.

“We manage that … by understanding that employee engagement goes far beyond compensation issues, and ensuring that we reward and recognize employees in a variety of meaningful ways,” she said. “Engaged, happy employees don't spend much time getting hung up on titles or job categorization.”

The Leominster-based bank, with almost 60 percent of its 155 workers in the non-exempt category, has a new online system through a national provider, she said, making time tracking easier for employees and managers ahead of Dec. 1.

Ripple effect

Mark Verrochi owns Upton-based Red Barn Coffee Roasters, a specialty retail and wholesale company, along with his wife Lisa. In business for 20 years with 50 employees, he is not too worried about the overtime rule change. With only about 12 salaried staff members, they work about 40 hours anyway, he said. Salaries are in line with productivity expectations.

“We don't demand 200-hour work weeks,” Verrochi said.

This government mandate and others are nonetheless hindering business owners, he said, especially owners like him who prefer a system of mutual respect with employees as opposed to micromanagement or timeclock punching.

“If they work 50 hours, they get time off the following week,” Verrochi said. “My business is here because of my crew and staff.”

Being dictated to regarding matters of minimum wage, sick time and overtime pay not only poses challenges as an owner, but as a manager, Verrochi said, taking away flexibility in terms of worker motivation. For example, if required to give a 16-year-old employee a higher minimum wage, what about employees who have been there for two years and worked their way up from minimum wage?”

“It has a ripple effect,” he says, “if they get a raise, why can't the others? I would give them all raises if I could. But with payroll increases, I can't keep absorbing it.”

Larger companies face different challenges, especially companies that involve medical care.

UMass Memorial Health Care of Worcester and its facilities, which include Marlborough and Clinton hospitals, with nearly 13,500 workers in all, isn't revealing its exact plans to comply with the new overtime-exemption mandate come December. But spokesman Tony Berry points out that health care requires not only logistical considerations for compliance, but also a careful look to ensure all departments can still effectively deliver high-quality patient care.

“This law places the burden on UMass Memorial Health Care to ensure that all employees eligible to receive overtime pay under this new law ... We will meet that obligation,” he said in a statement.

Nonprofits gear up

Deana Tuefferd is president of the Westborough-based CMEA Employers Association, a human resource and labor-law resource. She has been working to show its members the full perspective of the new overtime law, while helping members address issues surrounding compliance.

“It's not necessarily a bad thing, it will bring the standard up,” she said of the rule. “In Massachusetts the cost of living is so high, this helps to bring employees up to a better financial standard of living.”

Tuefferd said nonprofits, retailers and restaurants seem most concerned about the law.

“If they increase some salaries, do they do it across the board? How does it impact morale? Companies are getting educated, trying to determine the best solution,” she said.

Jan B. Yost, president of The Health Foundation of Central Mass., said her organization doesn't have salaried workers below the $47,476, so no changes are necessary.

For other nonprofits that rely on grants and state money, Tuefferd said, there isn't a lot of flexibility.

They can increase salaries to $913 per week, to meet the annual threshold, or pay workers hourly, with time-and-a-half compensation after 40 hours worked.

“It will hit them in the budget, or it's going to force them to take away from somewhere else,” she said.

Avoiding liability

Meanwhile, Loosemore, of the Worcester chamber, advises individual business owners to discuss compliance with their HR department or general counsel, to ensure they aren't opening themselves up to liability.

Verrochi, of Red Barn Coffee Roasters, having attended the MetroWest chamber session on the new law, is gearing up.

“They can throw something else at us,” he said of the government. “We just keep swinging.” 

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