May 20, 2016

Businesses brace for new overtime rule

Pensacola, FL - Every year, Accountingfly CEO Jeff Phillips and his staff set out a budget based on projections for revenue and expenses.

The Pensacola-based startup’s expenses have to be adhered to as tightly as possible since revenues can be unpredictable.

The recently announced change in overtime pay rules by the White House, however, have thrown the startup and other small businesses a curve ball.

The new rules take effect Dec. 1 and mean that all salaried workers making $47,476 or less must be paid time and a half overtime pay for weekly hours worked above 40. The current threshold is $23,660.

“When I think about salaried employees a lot of times they are working more than 40 hours a week, but they have signed up for getting the job done regardless of the hours,” Phillips said. “This could potentially put us in a tough situation and could increase costs.”

Businesses have more than 190 days to comply after several months of knowing this was coming.

It takes effect Dec. 1 and will be updated automatically every three years beginning Jan. 1, 2020. The Consumer Price Index will determine the threshold increases.

Industries important to the Pensacola economy will be affected by the new rules, according to Amie Remington, general counsel for Landrum Companies, which provides recruitment, staffing and human resources consulting.

“We have a lot of hotel managers who make above $23,660 but who don’t make the $47,476,” she said. “Our small retail and hotel and hospitality is where we are really going to see it.”

She has given presentations to numerous businesses for the past six months, preparing them for what was coming.

“It’s an opportunity for business to think strategically about what they want to be and how to best get there,” she said. “An internal audit will be very, very helpful. They will have to maintain time records on people who have been previously exempt.”

Remington gave a presentation on the topic to members of the Pensacola Chamber of Commerce earlier this month.

Its members have until Dec. 1 to make a lot of important decisions, said president and CEO Clay Ingram. They can choose to raise employee salaries to above the threshold. They can hire part-time workers to make up the difference in hours or they can choose to pay the overtime.

“The implementation period is the big concern,” he said. “It is almost like businesses are going to scramble to understand the rule and come under compliance all within 200 days. I think it is just too onerous on small business owners.”

The law doesn’t care about intent or whether a small business was aware of the rule or not, said Daniel Harrell, an attorney with Clark Partington who focuses on labor and employment issues.

Employees who feel they aren’t being paid for overtime hours can choose to take their employer to court. Lawsuits can result in double the back pay owed to the employee in addition to the plaintiff’s attorney fees.

Employees can also choose to file a complaint with the Department of Labor, which can levy fines.

Harrell said he is trying to be proactive with his clients to let them know about the new rules.

“What companies can’t do is ignore this,” he said. “If they do they are running enormous liability.”