Experts from both sides have been debating the new overtime rule since long before it was finalized in May. Salaried employees that make less than $23,660 per year are not eligible for overtime pay under the current laws. The new overtime rule more than doubles that minimum to $47,476 and goes into effect on December 1, but who, if anyone, does the new rules benefit?
New Overtime Rule Debunked
The Obama Administration has pushed hard for this change since 2014 stating it will benefit more than 4.2 million workers across the country. The announcement was met with criticism from opponents who believe the new overtime rule will actually hurt workers and businesses alike. Dr. David Weil, administrator of the Wage and Hour Division within the U.S. Department of Labor, immediately penned a blog in defense of the new law. In his blog Weil addressed the following concerns:
The new threshold will hurt those it is supposed to help. According to Weil, employees who have been working extra hours in the past will either have the opportunity to make more money or have the valuable personal time back.
Flexibility will be a thing of the past. Weil states that employers will not lose the ability to offer flexible schedules or telecommuting options. The new overtime rule allows employers to choose hourly tracking options that work for them without resorting to punching a time clock.
Morale will go down. Weil strongly defends this point saying that working an extra 10, 20 or 30 hours per week, without extra pay, is much worse on employee morale than the opportunity to be protected under the overtime law.
Goodbye incentives. Not true says Weil. Employers can choose to change employees to hourly and keep incentives or count the incentives as part of the annual salary. Either way, Weil says the employee will benefit.
There will be more lawsuits. Weil refutes the idea that there will be an increase in lawsuits saying that millions of workers will have new protections that will actually eliminate the need for litigation concerns.
Employers don’t have time to prepare. Weil argues that employers have been kept in the loop of these changes since they were first proposed in 2014. Additionally, employers were given over six months to prepare for the upcoming changes.
The Opposition Speaks
There have been dozens of articles opposing the new overtime rule for a variety of reasons, but all agree that the rule will harm the American economy as well as the workers it is supposed to benefit. Opponents from every sector in the workforce have stepped forward to expose what they believe are the harmful effects of the new law.
Tina Sharby, Chief Human Resource Officer for Easter Seals NH, Inc. appeared before the U.S. Committee on Education and the Workforce in June with her concerns. Sharby delivered a detailed report stating the effects the new law would have on both employees and those who utilize their services. According to Sharby, the overtime rule will result in an additional $427,000 cost to Easter Seals NH in the first year. This means program funding will be cut to cover the costs, meaning less services available to the public.
Sharby also pointed out in the report that many of the employees currently work extra hours as a way to learn a new skill, allowing them opportunities for promotion. Employees will lose this opportunity as a result of the new overtime rule.
Alexander Passantino, a partner at Seyfarth Shaw LLP appeared with Sharby in June with his own report. One of Passantino’s chief concerns is productivity. Under the current laws, a salaried worker is responsible to get their tasks done each day. Passantino says that while an employee may have downtime at the office where they are taking care of personal tasks, at the end of the day, the work will be done on their time. The new overtime rule, he says, will allow employees to go home at the end of their shift, even if they’ve whittled away the day and left tasks uncompleted. Or, the employer will have to pay overtime to compensate for their unproductiveness.
Passantino also says that the rule will eliminate the flexibility that many employees now enjoy, causing a decline in morale. For instance, a salaried employee may leave the office a few hours early one day to attend a school function for their child and then make up the hours later that week. Going forward, employees that are switched to non-exempt status because of the law will not have that flexibility.
Preparing for the Change
Employers still have time to prepare for the new overtime rule if they haven’t already. Regardless of which side you are on, the effective date is nearing and all businesses will need to comply.
Understand the rule. Employers and HR personnel should take this time to study and understand what the new overtime rule will mean. An explanation of the final rule is available on the Federal Register website.
Review current positions. Once employers have an understanding of the new law they should review their current positions and determine which positions will be affected.
Come up with a plan. Employers should discuss their options under the new law and devise a plan of how employees will be affected. For instance, employers should determine which workers will have their salary raised to meet the new threshold and which will be converted to non-exempt status.
Educate and train. Employers need to educate and train human resource and senior professionals on how to transition the workforce when the time comes.
SB Checks is a leader in workplace compliance. Call our experts today at (888) 725-2535.