RICHMOND, Va - Nearly 120,000 workers in Virginia, if not more, will be impacted by a new federal overtime compensation rule that takes effect December 1, according to the U.S. Dept. of Labor.
However, local small businesses are reporting confusion about how the new guidelines impact them.
The overtime provision of the Fair Labor Standards Act, an Obama administration policy change, increases the threshold for which workers automatically qualify for overtime pay. Starting December 1, most salaried employees who make less than $47,500 per year are eligible for overtime pay if they work more than 40 hours per week. Currently, the level is set at $23,660 per year for full-time salaried employees.
The White House said the 40-hour workweek has eroded over the years, with workers putting in more hours without being compensated for them.
Nicole Riley, Virginia Director of the National Federation of Independent Business, said they have heard from "more than 100" of their member business owners who are confused about how the rule change impacts their employees.
"Many of them don't have an in-house compliance officer, attorney, and/or human resources manager; so they're having to try to figure this out on their own," said Riley.
Some business owners are worried that the change will result in higher payroll costs, which could lead to lower wages for some workers or lost jobs for others, according to the NFIB. Riley said the rule limits how a small business owner structures their compensation packages for employees.
"This rule really does eliminate the flexibility an employer and employee have to talk about their schedule. Now it becomes more structured," said Riley.
However, some local business owners think the new rule is a good thing.
Tim Mullins, co-owner of Carytown Bicycle Co., said they immediately moved to comply with the rule as soon as it was finalized this summer. For some of his 25 employees, Mullins said that meant moving several salaried workers to hourly pay and some hourly workers to salary. The shift was "easy" according to Mullins because he said their business wanted to make sure their employees felt like they were being treated fairly.
"There is that trust that 'Am I going to be adjusting their hours?' Are they going to make less money,'" said Mullins when asked why the restructured so quickly.
The goal of the rule change is to get more money in the hands of the working class, according to the Labor Department.
"This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work," the final ruling on the Labor Department reads.
Mullins said he thinks the new pay structure for some of his employees will be a positive path forward for his employees and his business.
"I think there is always that healthy struggle between employees and employers. That's been going on since the beginning of time," said Mullins.
Companies will have to anticipate higher payroll costs, either by paying out more in overtime or raising the salaries of employees so they hit the $47,500 threshold to become exempt employees. Companies could also make changes to paid time off, bonuses and incentive plans to compensate.
In Indiana, the law is expected to affect nearly 250,000 workers.
The salary threshold will be updated every three years. Based on projections, it is expected to rise to $51,000 by January 1, 2020, after the first update.
The overtime rule change is an Obama administration policy, so local business advocates said they are interested to see what the Trump administration does. POLITICO reports that Trump cannot easily reverse the ruling, but that he has expressed interest in exempting small businesses.