Q&A: How New US Overtime Rules Could Help Or Hurt Employees
WASHINGTON (AP) -- More pay? Or just fewer work hours?
The new overtime rule the Obama administration issued Wednesday could mean thicker paychecks for some Americans who work longer hours -- unless it just means reduced time on the job.
The rule doubles the salary threshold at which companies typically must pay 1 1/2 times regular wages for any work done beyond 40 hours a week. Employers will now have pay salaried employees nearly $47,500 a year to exempt them from overtime -- up from the current $23,660. Hourly workers are already entitled to overtime pay.
Labor Secretary Tom Perez says the change will qualify 4.2 million more workers for overtime pay. The higher threshold is intended to offset inflation, which has eroded the threshold. Some retail and restaurant chains manage to pay low-level managers as little as $25,000 a year and no overtime -- even if they work 60 hours a week.
Business groups argue that the rule will raise compliance costs and paperwork because companies will have to track workers' hours more meticulously. They also contend that many small businesses can't afford either to raise their managers' salaries above the new threshold or to pay them overtime.
In addition to retailers and restaurants, the new rule will affect many construction firms, hotels, home health care providers, nonprofits and colleges. Here are some questions and answers:
Q.: Will managers at fast-food restaurants and retail chains who earn, say, $35,000 a year and frequently work 50 or 60 hours a week now be paid for all that extra time?
A. Perhaps. But there are many other possible scenarios.
The National Retail Federation says only about one-tenth of salaried workers who work overtime would likely receive raises high enough to lift them above the $47,500 threshold, which would exempt them from overtime pay. Workers who are paid above the threshold can still get overtime -- unless they perform supervisory or professional duties, a so-called "white collar exemption".
More than half of salaried workers below that threshold will likely have their base wages cut so that even after receiving overtime pay, their overall income wouldn't change, the NRF says. And an additional one-third will probably have their hours cut, the retail federation estimates.
Administration officials disagree that pay cuts will be so widespread.
"These are their most valuable employees," Perez said Tuesday. "They go to the bank and deposit the money. ... It's irrational to lower the salary of your most trusted employees."
Q: What other industries will be affected?
A. The National Association of Home Builders says that about one-third of construction firms will make changes in response to the rule. About half those companies said they will cut workers' hours. A quarter said they would raise salaries above the new threshold level.
Colleges and universities might have to boost pay for research and teaching assistants, many of whom work long hours for low pay. Farmworkers, home health care providers, and hotel employees may also benefit.
Q. What will the economic impact likely be?
A. As with nearly everything about the rule, supporters and opponents disagree on that question. Perez says the rule will collectively raise workers' pay by $1.2 billion a year, though that is just a fraction of the $8 trillion in wages and salaries Americans will collectively receive this year.
Even if employers cut hours for some workers to avoid overtime pay, they could be forced to step up hiring to ensure that necessary work is done. Economists at Goldman Sachs estimate that employers will create an extra 120,000 jobs in the year after the rule takes effect to offset a loss of hours.
The retail federation estimates that it will cost their retail and restaurant members $745 million to comply with the rule.
(Copyright 2016 by The Associated Press. All Rights Reserved.)
