ELLSWORTH — With some area businesses scrambling just to keep fully staffed this summer, few have given much thought to a major change in a U.S. Department of Labor rule that goes into effect Dec. 1.
The adjusted rule will raise the threshold for salaried employees who are currently exempt from overtime pay from $23,660 to $47,476.
In other words, unless a salaried employee is paid at least $47,476, a company must pay him or her overtime if that person works more than 40 hours a week.
A casual arrangement some companies and organizations might now use whereby employees work longer hours one week and take time off the next would be illegal.
Sen. Angus King (I-Maine) said raising pay scales is laudable, but might backfire due to the burden it could place on small business owners in Maine.
“It could end up having the unintended consequence of threatening their financial stability,” King said.
He said he was investigating how the rule could be implemented in a way that works for Maine employers while providing overtime pay for those who deserve it.
U.S. Labor Secretary Thomas Perez said, in opposing any delay, that workers have been waiting years for the change.
“The president and I think that American workers have waited long enough for a fair day’s pay for a long day’s work,” Perez said.
The Labor Department said employers can comply with the new rule by paying overtime, raising workers’ salaries to the new $47,476 threshold to maintain their overtime-exempt status, limiting workers’ hours to 40 per week, or some combination of the three.
The overtime rule broadens the definition of salary to allow nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary test requirement.
David Clough, state director of the National Federation of Independent Business, said his organization estimates 44 percent of small businesses in America will have at least one employee who will be affected.
Like Wilson, he said the issue likely will get more attention this fall.
He expects some employers will make their employees hourly, not salaried workers.
He said the Department of Labor has estimated that 16,000 workers would be affected in Maine.
“I think that’s quite a low estimate,” Clough said.
U.S. Sen. Susan Collins (R-Maine) said when the rule was announced that it would be “extremely damaging” to small businesses, universities, nonprofit organizations and service industries, particularly in rural states such as Maine.
The University of Maine System, she said, has 700 employees who would be affected by the dramatic increase and lead to an estimated $14 million increase in annual operating costs if salaries were restructured.
“Likewise, small businesses could be forced to cut hours, benefits and employees,” she said. “The effect of this increase will be repeated at nonprofits and small businesses across the country.”
She has co-sponsored legislation to nullify the rule and require the Department of Labor to take into account the outcome of any future rule changes on industries and organizations and in various regions with different costs of living.
A group of Democrats also is challenging the Obama administration proposal with a bill seeking to phase in the change.
Under the bill submitted by Democratic Reps. Kurt Schrader of Oregon, Jim Cooper of Tennessee, Henry Cuellar of Texas and Collin Peterson of Minnesota, the threshold would be raised over three years.
There would be a 50 percent increase the first year to $35,984. Each year following, the threshold would be raised, until Dec. 1, 2019.