A new national survey by San Francisco-based labor law firm Littler shows that an increasing number of in-house counsel, human resource professionals and high-level executives at top U.S. companies are concerned about the Department of Labor (DOL) new proposed overtime regulations.
The report comes as the U.S. House Education and Workforce Committee convened on Thursday to begin hearings on the Obama administration’s proposed rules under the Fair Labor Standards Act to address the executive, administrative and white collar exemptions from minimum wage and overtime pay protections.
In order to prevent the levels from becoming outdated, the DOL is proposing for the first time ever to include a mechanism to automatically update the salary and compensation thresholds on an annual basis using either a fixed percentile of earnings for full-time salaried workers or the Consumer Price Index.
Under current rules, anyone making up to $455 a week is guaranteed overtime if they work more than 40 hours, but those making more can be declared exempt if they meet certain requirements such as having supervision of other workers as their primary duty. Under the DOL proposal unveiled in June, the salary threshold would rise to $970. But rather than proposing specific changes in what managers can do and still be exempt, the administration is asking whether changes should be made and how.
According to Littler’s 2015 Executive Employer Survey that highlights insight from more than 500 respondents on a variety of issues impacting employers, companies said they were watching the Department of Labor carefully, aware that the required amount of overtime pay would likely sharply increase.
When surveyed, 25% of respondents were concerned that the DOL would raise the minimum salary for professionally exempt employees above the $23,600 threshold – a concern that was realized after the White House last month announced a new estimated level of $50,440 for 2016.
Meanwhile, 37% of employers were concerned that the DOL might eliminate the executive, administrative and professional exemptions for workers who spend more than 50% of their work time engaged in duties that are non-exempt. Twenty-nine percent (29%) of surveyed employers also worried about the executive exemptions that may disappear for supervisors who engage in some non-exempt duties.
“Changing the threshold for overtime pay will severely alter management’s outlook on how it fills positions as the drastic salary increase could squeeze out jobs due to payroll increases,” said Tammy McCutchen, a Littler principal whose practice is focused on labor and wage-hour issues. “The overtime adjustment and other potential changes from the DOL could cost employers billions of dollars. The employer community should take action now to shape the final rule.”
Earlier this month, Talk Business & Politics reported that the Labor Department has published its proposed rule to extend overtime protections to nearly 5 million white collar workers, which the Obama administration says is a critical first step toward ensuring that “hard-working Americans” are compensated fairly and have a chance to get ahead.
The comment period for the regulations will close on September 4, 2015. Only comments received during the comment period identified in the Federal Register published version of the NPRM will be considered part of the rulemaking record.
In response to the congressional hearing, the National Retail Federation sent a letter to members of the House committee Thursday (July 23) saying that the Labor Department’s proposal to expand overtime would limit career opportunities for workers. The NRF also released updated research showing that the plan could cost retailers hundreds of millions of dollars in administrative costs even if most workers see no increase in take-home pay.
“It is unlikely that many affected workers would experience a boost in overall compensation,” French said. “The net result of these changes would be an accelerated hollowing out of middle-level management, making it much more difficult for hourly workers to rise into the professional ranks. We expect companies would encounter difficulties developing talent and promoting internally due to the narrower pipeline of talent resulting from these changes.”
French’s comments came in a letter sent both to the House Education and Workforce Committee, and the Senate Health, Education, Labor and Pensions Committee.
A study conducted for NRF by the research firm Oxford Economics before the proposal was released examined the impact of raising the salary threshold to a series of possible levels. Now that the actual proposal is known, an update to the study shows that fully implementing the $970 per week level could potentially cost the retail and restaurant industries alone $8.4 billion a year.