From now through November, many local and national firms may be putting pencil to paper as they wrestle with an updated federal rule that spells out new overtime regulations for salaried workers.
Beginning Dec. 1, salaried workers who earn up to $913 a week — or about $47,500 a year — will be eligible for overtime pay, up from the old threshold of $455 a week, or just about $24,000 a year.
An estimated 4 million-plus workers, including about 28,000 salaried workers in Nebraska and 40,000 in Iowa, are expected to become eligible for overtime pay during the rule’s first year in effect, according to U.S. Labor Department calculations.
Whether those workers will receive a fatter paycheck remains to be seen.
In the next several months, many employers — particularly restaurants and retailers — probably will hone their staffing and salary plans, said John Schembari, a Kutak Rock attorney who consults with Omaha companies on workplace issues.
Under the old rule, unchanged since 2004, salaried workers who earned more than $23,660 per year were exempt from the overtime requirement, meaning employers didn’t have to pay them extra for working more than 40 hours per week. The new rule guarantees that salaried workers earning up to $47,476 are due overtime wages for working more than 40 hours a week.
(The law states that, generally, overtime must be at least time and a half of normal pay, though some employers pay double time or more. People in certain positions will remain exempt from earning overtime.)
The U.S. Department of Labor issued its final rule Wednesday updating the overtime regulations — new standards that were proposed and promoted by the Obama administration. The final rule didn’t change much from the proposed regulations announced last year.
“Most employers knew it was coming,” Schembari said. But many employers are still smarting about the numbers, he added.
“I think most employers could recognize that there needed to be some kind of cost-of-living adjustment, but to go and double it was really drastic: $23,660 is a low number, but going to $47,476 — doubling the threshold — is drastic,” Schembari contended.
Those workers were due for a raise, though, said U.S. Labor Secretary Tom Perez. He said the new rule is intended to boost earnings for middle- and lower-income workers. Their earnings generally have been stagnant since the late 1990s, he said.
Vice President Joe Biden announced the changes at an ice cream parlor in Columbus, Ohio. Being overworked and underpaid is preventing middle-class Americans from improving themselves and from spending time enjoying their lives and families, Biden said.
“You’re deprived of your dignity when you know you’re working much, much harder and much, much stronger than you’re getting compensated for,” he said.
An informal survey of about a dozen salaried workers in downtown Omaha on Wednesday found support for the new, raised overtime threshold. Many said the old $24,000 threshold was outdated.
The new overtime rule won’t affect Shawn Staiert — he earns a salary above the threshold as a financial systems analyst at First National Bank — but Staiert said he knew salaried co-workers who earned less and who probably would benefit from the new overtime rule.
“I think it’s a good idea,” Staiert said of the new regulation. “That way (employers) can’t take advantage of people and make them work 50 or 60 hours without being paid overtime.”
Overtime pay hasn’t received as much attention as nationwide efforts to increase the minimum wage, but the new regulation still could have a broad impact. The White House estimates that the rule change will raise pay by $1.2 billion a year over the next decade.
“This, in essence, is a minimum-wage increase for the middle class,” said Judy Conti, federal advocacy coordinator for the National Employment Law Project, an advocacy group.
The Labor Department said 4.8 percent, or 26,000, of Nebraska’s 547,000 hourly workers, earned minimum wage or less in 2014. In Iowa it was 5 percent. Nationwide, about 3 million people earned minimum wage, the agency reported, compared to the more than 4 million on salary.
With the new rules, some employers might choose to reduce their employees’ additional hours to avoid paying overtime, thereby making the workers’ schedules more consistent. “Either way, the worker wins,” Biden said.
How will employers handle it? Kutak Rock’s Schembari offered several scenarios.
Salaried workers who are close to the $47,476 limit may receive a slight bump in pay, he said, to exempt them from overtime eligibility.
Those who aren’t near the limit may be moved into the hourly wage category and see their hours cut to no more than 40 hours a week.
“Most of my clients don’t want to pay overtime,” he said.
He said smaller employers could be hurt most by the new rule. Many smaller employers get by on thinner profit margins than larger companies, he said. The smaller businesses also usually don’t have sophisticated systems to track hours like a larger company might.
Greg Cutchall, chief executive of Omaha-based Cutchall Management restaurant group, said the rules probably would affect certain salaried employees at some of the group’s 50 restaurants. Cutchall owns franchises of Domino’s Pizza, Paradise Bakery and Sonic Drive-In, among others.
“It really is another burden,” Cutchall said of the new regulation.
For some employees, it could mean spending more time tracking the number of hours worked — and pay cuts, he said.
Assistant managers earning less than the $46,476 threshold probably would be converted to hourly employees, which could result in smaller paychecks, like for instance if their hours are reduced during a slow week when normally they would have been on salary.
“I understand it, that maybe that $23,000-per-year salaried person gets abused. But to double it in my mind is ridiculous,” Cutchall said of the overtime threshold.
Across the country, many industry groups swiftly denounced the new rule.
The National Sporting Goods Association said it would have “a negative impact on virtually every retailer and team dealer.”
The National Council of Chain Restaurants called the new rule an “outrageous regulation” that could eliminate key management positions, derail employees’ careers and send workplace morale plummeting.
David French, the National Retail Federation’s senior vice president for government relations, called the new rule a “career killer,” depriving people of salaried status and what he said was the flexibility and benefits that came with it. Locally, Cabela’s and the Buckle said they had no comment on the new rule.
On the other hand, supporters applauded the Labor Department’s new rule.
Attorney Kathleen Neary of the Powers Law firm in Lincoln described the move as a victory for workers. She dismissed comments that it was a career stopper as “a bunch of hoopla.”
“This is just called being paid a fair wage for an honest day’s work,” said Neary, who also is president of the Nebraska Association of Trial Attorneys and deals with employment issues.
For years, she said, some employers — particularly those in the restaurant and retail industry — have tried to avoid paying overtime by categorizing people as managers or by paying them just over the old limit of $23,660.
The result was that workers were shortchanged. “They’ve had to work harder and much longer hours for essentially no pay,” Neary said.
“It’s only doing what is fair, ensuring that employees are properly compensated for the hours and hours of work they do for their employers,” she said of the new rule.
It “may infringe a little on the profits of these huge corporations,” Neary said. “If they choose to pass on this cost to the consumer or choose to pay their CEOs and their boards of directors a little less, that’s going to be their choice.”
Meanwhile, the new overtime rule also stipulates that the salary threshold be raised every three years to the 40th percentile for full-time, salaried workers based on the nation’s lowest-wage region, which today is the Southeast. The new rule brings the threshold to about that level.
President Barack Obama has called the new overtime rule “one of the single most important steps ... to help grow middle-class wages.”
The Obama administration has said that under the old rule, only 7 percent of workers recently qualified for overtime pay based on their salaries, compared to 1975, when 60 percent of salaried workers qualified for overtime pay.
The Associated Press contributed to this report.