Proposed regulation change could qualify millions for overtime

FARGO -- The U.S. Department of Labor recently initiated a process that could significantly boost the pay for millions of Americans now exempt from overtime requirements under the federal Fair Labor Standards Act, which has gone largely unaltered...
Proposed new rules on overtime pay could have serious impacts on businesses. iStock photo

FARGO - The U.S. Department of Labor recently initiated a process that could significantly boost the pay for millions of Americans now exempt from overtime requirements under the federal Fair Labor Standards Act, which has gone largely unaltered since it was passed in the 1930s.

While the regulation change is only a proposal at this point, it could potentially affect many businesses, and employers would do well to consider the overtime ramifications, said Mark Mathison, an attorney with the Gray Plant Mooty law firm in the Twin Cities who specializes in labor and employment law.

Gray Plant Mooty opened a Fargo office in 2014 and recently expanded that operation with the acquisition of a Fargo trust and estate law firm earlier this year.

A conversation with Mathison regarding the proposed regulation change is presented below in a question-and-answer format.

Q: What are the rules regarding overtime?

A: Federal law requires that workers who work more than 40 hours in a week be paid overtime at a rate of time and a half their regular rate of pay for all hours over 40. That affects most employers, one way or another, though statute and regulations allow for exemptions of overtime requirements.

Q: Can you talk about the exemptions?

A: Exemptions affected here (by the proposed regulation changes) are what are called white-collar exemptions - professional, managerial and administrative people who are salaried workers in those types of jobs. They may be exempt if the employer meets certain conditions and one key condition is the amount of the salary required.

Q: What is the salary threshold now and how would it change under the proposal?

A: Today, the law is if the worker is being paid on a salary basis and the salary is at least $455 a week, or $23,660 a year, they don't have to be paid overtime. The proposal would raise the salary threshold for overtime exemption to $921 a week, or $47,892 a year. That would mean that unless a worker's salary is at least that high, they would have to be paid overtime for any time worked over 40 hours in a given week.

Q: How many workers may be affected if the change is approved?

A: Estimates are that the change could result in employers being required to pay overtime to some 4.6 million workers who are currently classified as exempt from the overtime rule.

Q: How concerned should employers be?

A: One reason employers might be concerned: If the change is approved, that new $47,892 salary threshold would rise each year based on an index factoring in wages from across the country. The concern is, the average wage in Fargo is not the same as the average wage in New York City, or Kansas City, or Atlanta.

Q: Are there specific concerns for North Dakota employers?

A: North Dakota has a very tight labor market. Presumably that is driving wages up but, more importantly, that is making it more likely an employer will need workers to work more than 40 hours a week. If employers have to pay overtime for that, that's a significant cost factor for the business, potentially.

Q: Which sectors would be most affected?

A: It's clear industries that have lower-paid managers will tend to be more affected by this and markets that have lower average wages will also be disproportionately affected by this change. That may include hospitality and service industries. Information technology people might be affected by this, too.

Q: What is driving the proposed change?

A: Broadly, the Department of Labor has an agenda to revive the middle class. With that agency - and other agencies, both state and local - there is a lot of that going around.

Q: What should employers be doing?

A: If this is going to become effective next year, or late this year, businesses ought to be considering: "How does this affect my budgeting for 2016? Am I going to need more people to avoid the overtime?" There is no clear answer and it will require planning and implementation.

Chamber: law of unintended consequences may apply in overtime rule change

BISMARCK-Andy Peterson, president and CEO of the Greater North Dakota Chamber of Commerce, said the chamber has concerns about proposed changes to federal overtime rules. He said the state organization endorses a stand taken by the U.S. Chamber of Commerce, which has asserted the changes would hurt small businesses and limit employment opportunities.

"What we're really concerned with is this overarching rollout of regulations that come via executive orders that are seeking to change either employment or environmental (rules) without them going through Congress," Peterson said.

"What we're looking for is a degree of certainty that the law of unintended circumstances won't damage the employer/employee relationship," he said.