Announced in June by the Obama administration – and expected to be implemented within months – the change significantly raises the pay level at which certain employees are exempt from required payment of overtime.
The 77-year-old federal law requires employers to pay overtime, but lists a number of exemptions. The proposed change would only affect those categorized as managers and supervisors. But that could be as many as 5 million people nationwide, especially lower-level managers in retail, restaurant or similar jobs even if they are on salary.
The idea drew applause from workers’ groups and criticism from business organizations. And in Georgia, hundreds of millions of dollars hang in the balance.
It’s all about how an employee is classified: Are you exempt from federal rules about overtime or not? When it comes to managers, the government in 2004 drew the line at $455 a week, or $23,660 a year. Make more and you are exempt, make less and they owe you for any overtime.
The Department of Labor is looking to move the line: Plans call for raising that ceiling to $970 a week, or $54,440 a year. A manager making any less would have to be paid OT at time and a half of regular pay. Comp time is not acceptable for overtime, according to the agency.
Valerie Johnson, of Jasper, wishes that line had moved a few years ago, when she started working in a doctor’s office. For two-and-a-half years, she worked an average of 11 or 12 hours of overtime each week, she said.
“Patients would say, ‘Wow you’re still here? You must get a lot of overtime,’” she said. “But when we brought it up, (the owner) just fluffed it off.”
Had the higher threshold been the law when she was working, she would have made time-and-a-half for all those hours.
She sued after leaving the job. The judge threw out much of her case because during her time on the job, she got a raise to more than the current exemption point of $23,660 a year.
Had the higher threshold been in effect when she was working, the case would have been open and shut in her favor, said Paul Chichester, attorney with Buckley Beal Law, which often represents workers in disputes with employers.
Expanding the number of workers with overtime is both fair and practical, he said.
“I think the benefits are going to be great. I think employees are going to see an improvement in their quality of life. And if they get the raises that will help the economy.”
Overtime pay is not required of companies with revenue of less than $500,000, and the new rules would not change that.
But for businesses larger than that, the change could add a painful cost, said James Miller, spokesman for the Georgia Retail Association.
The association estimates the rule will affect 53,100 people in retail and restaurant businesses in Georgia. “It is still too early to know for sure what the effect will be,” Miller said. “But there is no doubt about it – this would be damaging from a small business perspective.”
If the same portion of Georgians are affected as nationally, the total number affected will be about 150,000.
Costs passed along
One effect will be that businesses will simply pass the cost along to customers, Miller said, adding, “If prices are raised as a result of this, how does that help the economy?”
Some companies might simply treat the added expense as a cost of doing business. Others might try to avoid paying overtime by cutting hours. They could also boost a manager pay just enough to make them exempt.
Some managers will probably be converted to hourly status, the National Retail Federation says. Then they might get overtime pay, but they could lose other benefits.
All those possibilities make it impossible to guess how many workers will actually be pushed into non-exempt status, said John Thompson, partner with law firm of Fisher & Phillips, which represents employers. “I am not sure anybody really knows except very generally.”
Supporters should not assume that the change will be good news from a worker standpoint, he warned.
“There are a lot of alternatives for how you may pay that person so that people may not wind up making much more money than they would have before.”
Valerie Johnson, however, welcomes the new rules.
“I think the employers definitely have the upper hand,” she said. “I talked to so many people who were in a similar situation to mine. But if you are doing the work, then you need to be paid for it.”