By Jan. 1, employers ranging from mom and pop stores to billion-dollar corporations must decide how they’ll comply with new federal rules that boost the number of workers eligible for overtime.
Right now, most workers who earn less than about $23,700 a year are entitled to be paid time-and-a-half for working more than 40 hours a week. The new rules raise the threshold to $35,568.
“About 30 percent of our workforce could suddenly become eligible for overtime,” said Leila Melendez, chief operating officer of Workforce Solutions Borderplex. “That ends up being about 115,000 employees in El Paso and 1.3 million nationally.”
It’s been 15 years since the U.S. Department of Labor adjusted the salary threshold for workers exempt from minimum wage and overtime. While many businesses pay overtime to hourly workers, white-collar employees are often exempted from additional pay.
The new rules don’t affect the $7.25 minimum wage for hourly workers, which the Labor Department hasn’t raised in 10 years, though some states and cities have.
Employers that will be affected most by the change include nonprofits, retail stores, restaurants and home health care providers paying flat salaries to managers and others who routinely work more than 40 hours a week.
“These are also jobs in office and administration support, transportation and material movers, like warehouse managers and transportation managers,” Melendez said. “You have some production operations and even some installing, maintenance and repair operations.
“So it’s a pretty diverse range of occupations, those middle managers.”
In 2014, the Obama administration tried to tackle the problem of stagnant income growth by raising the $455 weekly minimum salary to $913 – the inflationary equivalent of $455 in 2004. It would have covered 4 million, or 33%, of the nation’s workers.
But opposition was strong, and that change was blocked by a Texas district judge in 2017.
Melendez thinks the strong economy and low unemployment rate are the reasons why there hasn’t been more opposition to the proposed change this year.
“In this market, because our unemployment rate is so low – 3.7 percent – there are more jobs than there are people to fill them right now,” she said. “Employers are even looking at people coming out of the criminal justice system.”
If they haven’t already, businesses will have to start making tough decisions about salaried employees who work more than 40 hours a week.
“A business has a choice,” said Melendez. “The overtime threshold is moving to $35,568. So if you pay them less, they become hourly and are eligible for time-and-a-half overtime pay.
“As the employer, I have to decide if I want to keep them under $684 a week and move them to hourly. The question is am I going to use them more than 40 hours a week, or am I going to scale them back to control that salary amount?”
Then, the risk is having to pay overtime, which can pile up fast.
Cindy Ramos Davidson, CEO of the Hispanic Chamber of Commerce, said the chamber balked at the Obama proposal because it was simply too much of an increase for employers to bear at one time.
“This is still a little bit higher than what our businesses said they wanted, but it’s certainly at a point that’s doable,” she said. “That $35,568 is doable from the $23,660.”
Like other businesses and nonprofits, she said, the chamber will be deciding who to bring up to $35,568 and which exempt employees will become hourly and eligible for time-and-a-half pay.
“We have been planning for this. We knew it was coming,” said Sylvia Acosta, CEO of the YWCA El Paso Del Norte Region. “Our biggest concern is not having to lay people off.
“I think we have 45 employees who would stay exempt or move to nonexempt.”
As it is, she said, it is hard to find and keep employees in El Paso these days because the unemployment rate is so low.
The YWCA’s human resources director, Mayela Macias, recalls her days working in retail and putting in seven days a week, much like a store manager.
She said the coming change is likely to be hard on stores with a single manager who does everything and puts in 60 to 70 hours a week for a lot less than the minimum salary threshold that takes effect Jan. 1.
“Now they have to take a hard look at whether they’re going to bump them up $10,000 or put them on hourly and trim their hours,” she said. “Another thing is they might not even know about this if they’re a small business.
“A lot of the time, they don’t keep up to date with the changing laws until someone tells them.”
Email El Paso Inc. reporter David Crowder at firstname.lastname@example.org or call (915) 534-4422, ext. 122 and (915) 630-6622.