Tribune-Democrat: Overtime pay rules may have ‘unintended consequences’

An imminent change in federal overtime regulations could have “unintended consequences” for employees and business, U.S. Rep. Keith Rothfus, R-Sewickley, said Tuesday.

Rothfus attended a roundtable discussion about the upcoming update to the federal Fair Labor Standards Act on Tuesday afternoon at the Somerset Trust building in Johnstown.

At the discussion, Patti Hudson and Joel Valentine, shareholders at Johnstown-based accounting firm Wessel & Co., presented an overview of the upcoming rule changes to representatives of several local businesses and nonprofits.

The Fair Labor Standards Act mandates that workers who earn an hourly wage must be paid overtime – 1.5 times their usual wage – for any hours over 40 they work in a workweek.

However, workers who earn a salary instead of an hourly wage and who perform some managerial or administrative duties are exempt from that requirement, assuming they earn at least $455 per week, i.e., $23,660 per year.

Assuming the new rules go into effect, that pay threshold will increase on Dec. 1 to $913 per week – $47,476 per year. Also, any worker whose job does not involve executive, administrative or professional duties will be subject to the new rules.

In effect, workers who currently earn a salary between $23,660 and $47,476 per year or whose job does not include executive, administrative or professional duties will soon earn an hourly wage and become eligible for overtime pay.

The Department of Labor estimates that the change will affect 4.2 million American workers.

There are only a few exceptions to the new rules. Teachers, physicians and attorneys are exempt, and businesses with annual revenues of less than $500,000 are not subject to the Fair Labor Standards Act and thus won’t be affected, Hudson said – although individuals may still be subject to the act if their job duties involve travel across state lines, in which case their employers must comply with the rule change.

Advocates for the change say that the new rules will ensure workers receive pay for all the hours they work.

But local opponents say the change will pile onerous regulations on businesses, hurting employees in the process.

“It’s really stifling our local businesses from growing and expanding, creating new jobs,” Debi Balog, director of workforce development at JARI, said Tuesday.

“It’s really hitting us hard.”

“It’s going to force employers to employ people less than 40 hours,” Frank Janakovic, mayor of Johnstown and CEO of the Alternative Community Resource Program, said.

The change could thus force employees who currently work full time to find a second job, Janakovic added.

Rothfus said the rule change was an example of an unsuitable “one-size-fits-all” approach from Washington bureaucrats.

The increased threshold might help workers in large cities with high costs of living, but it doesn’t capture the law’s intent in places like Johnstown, he said.

ACRP’s Kristy Baker pointed out that currently salaried employees whose duties include responding to calls or emails after business hours would not be able to continue such duties if they earned an hourly wage.

Although there’s little time left before the rules go into effect on Dec. 1, Rothfus said he and several congressional colleagues are working to delay the rule change for six months to allow for further study of its impacts.

The House of Representatives has passed legislation to that effect by a 246-177 vote, but the Senate has not passed a corresponding bill.

“It’s going to take a concerted effort to get that delay” given that President Barack Obama has promised to veto any legislation that would delay the rule change, Rothfus staffer David Goldfarb said Tuesday.

Rothfus encouraged opponents of the changes to contact their senators and encourage them to vote in favor of the six-month postponement.