6 ways Obama’s OT plan might affect employers, employees

You’ve heard about President Obama’s proposal to rewrite overtime pay rules, but what does it really mean? To your employees? And to your company?

Labor unions applaud the move but business groups argue that changing the rules might prompt employers to reconsider their supervisory structures, reducing flexibility for managers to directly serve customers and cutting entry-level management jobs.

Here’s how we believe the regulation would affect businesses and employees:

1. Widespread application. More than 11 million employees in every industry would be affected. Most employers covered by the Fair Labor Standards Act would have to analyze and adjust employee classifications by sometime in 2016.

2. Higher labor costs. The proposed rule sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers, which for 2013 was $47,892 annually. If this approach is adopted, the 2016 level is projected to be $50,440 annually. This is expected to have a disproportionate impact on non-profit and service businesses, as well as certain geographic regions.

3. Salaries will increase automatically. The Labor department wants to automatically update salary levels every year, based either on percentiles of earnings for full-time salaried workers or changes in the inflation rate.

4. Reduced flexibility. Reclassifying significant numbers of employees from exempt to non-exempt status will require tracking of hours worked and is expected to reduce flexibility.

5. No more pay, but your hours could be limited. If you regularly work long hours but don’t get paid overtime because you’re exempt, you might be able to start heading home earlier. Your boss might just prefer to send you home after an eight-hour day instead of paying you extra.

6. More part-time jobs. Employer might choose to hire new part-time workers to cover the extra hours you used to work.

The proposal is subject to a 60-day review period before a final rule change can be issued. We’re now about half-way through that review.


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About the Author

Larry Hannappel

Larry spent 16 years with Century Casino’s and was instrumental in the start-up and growth of the company through expansions in Canada, South Africa, the Czech Republic, Poland and on several cruise ships as well as in Colorado. He was most recently the SVP, Principal Finance Officer and COO of North American operations for Century Casinos Inc., a multinational, Nasdaq-traded gaming company. Earlier in his career, Larry worked at the Johns Manville Corp. Larry spent 13 years in various accounting and finance functions in the company’s fiberglass manufacturing division and was key in the start-up of a molding plant in Indiana. Larry and his wife Kathy and three children live in Colorado. He enjoys four-wheeling, motorcycling, golfing, skiing and brewing beer.