Business

View from HR: For employers, understanding federal overtime law is key

A controversial topic in HR land right now is a big change in federal overtime law. The bottom line is we expect tens of thousands of managers to become eligible for overtime pay for the first time in their careers.

Why? The minimum salary requirement is doubling to about $50,000, perhaps by mid-year. Think of all the industries that serve the public, produce things, cook the food, build the roads, and make things work where first and second level supervisors have lower base salaries. The biggest impact is on small business.

The idea is to mandate a pay level above current market rates, much like raising the minimum wage for hourly workers. The impact on overtime pay expense is huuuuuuge. Employers are reacting by converting supervisors to hourly paid, to raising some salaries already near the new threshold to eliminating some supervisory roles, to controlling hours.

Risky move

Most agree the salary minimums need revision, but doubling them in one move is risky. The history of the Fair Labor Standards Act (FLSA) includes political tinkering, industry lobbying, neglect and resistance to change. It does some good and necessary things (it prevents child labor abuse) but too many irrelevant provisions are a drag on today’s economy and employee opportunity.

Which federal law says you may not volunteer your time to a business (including most startups or internships), you must record even one minute of work on a smartphone after hours and you cannot agree to bank overtime hours to use as future vacation at your business? When I tell a new entrepreneur she cannot lawfully allow her best friend to work for her with no expectation of pay, she is confused. “But she wants to help me, and I’d like to pay her one day when I can.” Sorry, this was settled back in 1938.

There are so many workplace laws stuck in a time warp, but the FLSA is the Big Daddy. It was New Deal legislation to get the country moving again post-Great Depression. One purpose was to make overtime hours so expensive that employers would hire more workers.

Get educated

The problem is, the world changed a few times since the 1930s, and thousands of pages of rules and regulations have turned the FLSA into a spider’s web of illogical mandates locking American workers and employers in this ill-fitting suit of clothes.

Why are teachers, railroad employees, seamen, newspaper deliverers, livestock auction workers and sugar processors ineligible for overtime pay, while most paralegals, executive assistants, accountants, and skilled construction trades are eligible for overtime pay? Because of lobbyists and historical quirks than no longer matter.

We receive about 10,000 workplace questions from our member-employers each year via phone, text, email, 24-hour hotline and live chat. About 20 percent of those questions are about this antique law and its bookshelf full of rules. While the FLSA is grossly out of date, it is the law and can create significant liabilities whether violated purposefully or negligently. Get educated on how it regulates your job and your employees.

Bruce Clarke, J.D., is CEO of CAI, helping more than 1,000 North Carolina employers maximize employee engagement and minimize employer liability. For more information, visit www.capital.org.

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