A silver lining in Obama’s OT overhaul? News added by Benefits Pro on March 17, 2014
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Joined: September 07, 2011

By Dan Cook

Many employers are likely to get an administrative migraine as a result of the overtime memorandum sent by President Obama to the U.S. Department of Labor.

But overall, the number of workers expected to be directly affected by the new regulations will be relatively small – about 6 million.

And the exercise to determine who works how many hours doing what may actually help businesses wring out new efficiencies.

Those are a few of the observations from Mark Wilson, one of the nation’s leading experts on the matter of exempt/nonexempt employees.

Wilson, chief economist and vice president of health and employment policy for the HR Policy Association, knows all about the Fair Labor Standards Act and its OT regulations. He helped write the last update during the Bush administration in 2003-2004.

“There’s no doubt an update is needed,” Wilson said. “For the workplaces that will be covered by the new regulations, there will be a number of adjustments required. There are ways employers can adjust and adapt to changes in the salary levels to mitigate the costs. It all depends upon what they finally propose.”

No one, at this point, knows what will come from the DOL.

But Wilson anticipates that the agency will change the primary duties test for whether a job is exempt or nonexempt; substantially increase the minimum salary for professional worker status; reinstitute a percentage of time measure as the determination as to what a person’s primary duties are; and possibly even attempt to integrate modern social media communications options into the regs.

Currently, to fit under either the “executive” or “administrative” exemptions to the FLSA, among other things, the employee must make at least $455 per week in salary. Raising that number would mean fewer “exempt” employees, thus enlarging the pool of OT-eligible employees.

Who’ll be hit hardest?
Retailers, especially any operation where managers also tend to pitch in to handle the cash register, brew and serve the coffee, and restock shelves when they’re not hiring, firing, and generally managing their direct reports.

Retailers in “flyover country” as opposed to the big cities will be particular targets of the regs, since folks in larger metro areas tend to make more money than in exurbia or rural America.

“All the franchise owners will feel this one,” Wilson said. “You may have an owner who has a number of McDonald’s franchises, or owns a number of different brands. He’s gonna have to pay a lot of attention to who is working how many hours. Starbucks is a great example. Someone in every Starbucks is responsible for all the daily manger stuff, and in a crunch that person may fire up a couple of cappuccinos.”

Wilson said the need to closely track people’s hours “will likely force these kinds of companies to go back to the old time study days, when they had to put a stopwatch on what people did during the day. If you are going to be exposed to the lawsuits the regulations will be driving, you’ll have to know what percent of time people are spending on management and non-management duties. It’s a real pain for employers to do.”

Therein could lie the only upside as far as employers are concerned.

“The workplace has gotten pretty darn efficient over the last decade,” Wilson said. “But having to do time studies on workers could drill down even further on productivity.”

While some employees will benefit from the new rules, others may not, Wilson said.

As he mentioned, there are well-known strategies for maintaining the status quo on such workers when it comes to their total pay, and those who shift from salary to hourly may actually wind up getting less money as employers keep a closer eye on their hours.

How soon does Wilson expect to see final rules issued by the DOL?

Based on his experience with the Bush administration’s re-writing of the laws, he thinks something could be out by October of 2015.

Originally published on BenefitsPro.com
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