Latest Worry for Small Business Owners: Overtime Pay for Managers

Many small-business owners are up in arms over President Barack Obama’s proposal to raise the salary floor at which overtime pay kicks in.

Under the current law, salaried employees who earn at least $455 weekly, or nearly $12 an hour, and are tasked with certain work responsibilities, are exempt from overtime. Mr. Obama wants the U.S. Department of Labor to consider raising that, in the interest of fairer pay practices. A weekly salary of $455 translates into $23,660 a year, which is below the federal poverty line of $23,850 for a family of four.

Not surprisingly, small-business owners are concerned about added costs. But some also say the change could dissuade workers from putting their all into a day’s work.

The National Federation of Independent Business, a lobbying group, says it intends to fight an extension to overtime eligibility. “We feel this plan is another antibusiness policy,” said Eric Reller, an NFIB spokesman. The organization sent out newsletters to its 350,000 members informing them of the possible change, and has made the proposal a topic discussed at their state-level meetings.

Economists are somewhat divided over the broader impact of raising the overtime floor, a proposal that the Labor Department is still hammering out. Once they come up with their recommendations on how to make overtime pay available to more workers, the business community will have an opportunity to weigh in during a 90-day public-comment period.

Ross Eisenbrey, vice president of the Economic Policy Institute, a nonpartisan think tank in Washington, D.C., recommended in November that the floor be raised to $984 a week, or nearly $25 an hour—a change that he says could help as many as five million salaried employees.

Yet Dean Baker, an economist with the Center for Economic and Policy Research in Washington says that even if the threshold were raised as high as $20 per hour, just a few hundred thousand workers would be newly eligible for overtime. “This has been hugely overblown, the impact is likely to be relatively limited,” Mr. Baker adds.

Small-businesses owners say they are already struggling to keep up with current pay requirements.

Joseph Harris, an attorney with the New York City-based employment law firm White Harris PLLC, says as it is, roughly 60% of the cases he has worked on in the past two years involve issues related to small companies’ confusion over these wage laws and failure to pay overtime. For instance, at a small consulting shop where one manager salaried employee voluntarily stays late while another responds to emails about work projects after hours and on the weekend, both employees may be legally eligible for overtime pay under the current federal law.

Restaurants, retail shops and other small businesses often rely heavily on hourly workers who need supervision—usually by salaried managers and shift supervisors, who themselves may fill in or work overtime during busy periods.

Source: Wall Street Journal