Business

Charlotte companies brace for overtime proposal

Dylan Kensler, center, prepares a customer’s order at Salsarita's Fresh Cantina in Indian Land. Companies like Salsarita's are adapting to new planned overtime rules.
Dylan Kensler, center, prepares a customer’s order at Salsarita's Fresh Cantina in Indian Land. Companies like Salsarita's are adapting to new planned overtime rules. jsiner@charlotteobserver.com

Charlotte companies are scrambling to adapt to a recent White House proposal to increase the number of employees eligible for overtime pay.

The proposal has companies ranging from restaurants to retailers implementing new training systems and installing sign-in systems.

Currently, hourly employees are automatically eligible for overtime pay, or time-and-a-half pay, if they work more than 40 hours a week. Salaried workers making $23,660 a year or less are also eligible after 40 hours.

Under the Labor Department’s proposal, which could be finalized as soon as 2016, workers earning an annual salary of $50,440 or less would qualify for overtime pay. This would include occupations ranging from business analysts to fast-food store managers.

The Labor Department’s estimates suggest the proposal would raise wages for 5 million people, but other estimates are far higher, according to The Associated Press. The Economic Policy Institute, a liberal think tank, recently estimated that a threshold of $984 a week would cover 15 million people.

“This is by definition middle-class people. This reverses decades of neglect,” said EPI President Larry Mishel, adding that the proposal would also likely create jobs for hourly workers.

But some workers could see their pay go down as companies rush to adapt to the new rules. The National Retail Federation says companies could reduce hourly pay rates, cut bonuses and benefits, and reduce some workers’ hours to fewer than 40 a week.

The Labor Department is taking public comment on the proposal before it finalizes the rule.

A lot of people are very shocked it’s going to go double. Why didn’t they do something a few years ago? That’s the first comment we’re hearing.

Kenny Colbert, president of The Employer’s Association

Companies across the region have expressed worries over “the magnitude of the jump” in the salary threshold that is eligible for overtime, said Kenny Colbert, president of The Employer’s Association, a human-resources consulting company based in Charlotte.

“A lot of people are very shocked it’s going to go double. ‘Why didn’t they do something a few years ago?’ That’s the first comment we’re hearing,” Colbert said.

Some businesses, such as Famous Toastery, a restaurant chain with six Carolinas locations, have already begun to implement changes.

CEO Robert Maynard said the company was training its employees to complete closing duties and other managerial tasks, so managers can work 40 hours per week instead of 45 or 50.

The company is also implementing a fingerprint sign-in system, in which employees punch in and out of shifts and company managers receive alerts if an employee is hitting 39 hours and still has a day left.

In some ways, this new proposal is increasing business efficiencies: “It forces you to be a little tighter, a little stronger and makes cross-training mandatory,” Maynard said.

Phil Friedman, CEO of Charlotte-based Salsarita’s, said the restaurant chain is trying to identify people holding management roles who are exempt but would become eligible for overtime pay under the new rules.

“(For) anyone with a relatively small or medium business, this is definitely going to change the cost structure of business,” he said.

Other Charlotte companies aren’t disclosing their plans. Bojangles’, Lowe’s and Dollar Tree declined to comment.

It forces you to be a little tighter, a little stronger and makes cross-training mandatory.

Robert Maynard, CEO and co-founder of Famous Toastery

Some responses to the legislation, such as hourly pay-rate reductions, could strain employer-employee relations, Colbert said.

“Whenever you start trying to manipulate an employee’s pay, they immediately think they’re going to get the short end of the deal. A company needs to have a really sharp pencil to pull this off,” he said.

The analytics firm Oxford Economics found raising the wage threshold from $455 to $984 per week would cost restaurant and retail employers $9.5 billion per year if they did not take steps to ease the impact.

ADP LLC, a provider of business outsourcing solutions, has been conducting webinars to address questions on wages. Tara Wolckenhauer, divisional vice president of human resources, said small-business customers from all sorts of industries, ranging from manufacturing to retail, have engaged in the webinars.

“We’re hearing questions about the laws around pay and what makes employees eligible for salary pay versus a nonexempt situation,” she said.

These potential changes to overtime pay rules could boost employee morale and perhaps productivity, according to Tom Juravich, a professor of labor studies at the University of Massachusetts Amherst.

“People are grouchy about (unpaid) overtime, and I think that has led to relatively low productivity in a lot of these sectors,” Juravich said.

Staff writer Jacob Steimer and The Associated Press contributed.

Chaney: 704-358-5197; Twitter: @sechaney

Preparing for new overtime rules

The National Retail Federation and other experts say companies might seek to blunt the impact of new overtime pay rules in these ways:

▪ Reducing hourly pay rates

▪ Cutting bonuses and benefits

▪ Reducing some workers’ hours to fewer than 40 per week

Source: National Retail Federation

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