What will the Proposed Overtime Rule do to Workplaces?

Companies say a new federal overtime proposal could hurt them.

The proposed changes to overtime pay by the Obama administration would give nearly 5 million Americans working in white-collar jobs extra pay, according to the Pew Research Center. However, if enacted as it currently is, it could also break down the corporate ladder for many, business owners told The Society for Human Resource Management website. Some companies could eliminate certain positions in an effort to save money.

It could also create a lot more paperwork and regulations for corporate human resources to follow. Human resource management systems might need to keep tabs on how long employees work each day to make sure they don’t over eight hours or 40 hours a week.

New thresholds
The Department of Labor’s proposal raises the threshold for those currently exempt from overtime pay to $970 per week or $50,440 a year. Set in 2004, the current baseline is $455 per week or $23,660 per year for employees working over 40 hours a week.

Under the proposed plan, the threshold would automatically rise each year based on the Consumer Price Index or on wage percentiles, according to the Pew Research Center.

Meanwhile, anyone may comment about the department’s proposal via a government website until Sept. 4, 2015. The new rate would be a boon to many employees, but most especially to single mothers and other women who hold more lower-paying jobs than men, according to the National Women’s Law Center.

Companies say a new federal overtime proposal could hurt them.The U.S. Labor Department’s overtime proposals could make climbing the corporate ladder tricky.

Logistical problems
However, not everyone applauds the administration’s move as some companies plan to carefully watch how many hours their employees work, according to The Wall Street Journal.

“It’s a big logistical issue to make sure you’re catching all the time,” Ron Peppe, vice president of legal and human resources at Canam Steel Corp., told The Wall Street Journal, adding that his company already employed a full-time compliance officer to ensure the business meets the proposal’s requirements if it becomes law.

The proposal could lead businesses to cut workers’ hours, hire more part-time employees and curtail certain benefits, the SHRM website reported, in an effort to avoid paying overtime or compensate for having to pay it.

With more employees eligible for overtime, it could prove problematic for white-collar job holders to climb the corporate ladder.

“They may also stop providing the normal career ladder employees may have otherwise had since many assistant manager, retail manager and other lower-level exempt positions may be eliminated,” Robert Boonin, an attorney at Dykema in Detroit, told the SHRM. “Employers may also determine that they need fewer traditional managers, and instead use lead employees to oversee various shifts or departments.”

Hours cut
Donna DiPasqua, president of Subway Management Inc., a restaurant operator in Ocala, Florida, said if the proposal becomes a law it would cause her to cut staff hours at her six restaurants, hire more part-time workers and introduce a lower starting salary to new employees.

Meanwhile, Famous Toastery, a chain of restaurants across North Carolina and South Carolina, recently enacted changes to its employees’ schedules in an effort to stave off the expenses overtime pay would bring.

According to The Wall Street Journal, managers are curtailing their work to 40 hours a week and giving former managerial duties like closing up at night to waiters and waitresses.

The proposal could also affect jobs that require fluidity between work and home. Employees who typically work via smartphones, tablets or laptops from home or on the road could see their hours cut or monitored even more.

Compensating employees more could also lead companies to offer fewer benefits, have workers pay more out of their paycheck for insurance or cut back on matching pension funds.