Locally, opinions divided on Obama’s overtime rule change

PHOTOGRAPHER: John Cropley

President Obama’s attempt to make many more people eligible for overtime pay drew a range of reactions Wednesday from Capital Region business advocates and labor attorneys, ranging from it being a long-overdue worker protection to yet another burden business owners must shoulder.

The regulation, which must be reviewed by a Congress hostile to Obama’s policies, will require that employers pay overtime — 1.5 times the regular salary for time worked beyond 40 hours per week — to anyone making less than $47,476 a year. Previously, the threshold had been $23,660.

Overtime also is required for employees earning more than the threshold, unless they primarily perform administrative, managerial or professional duties.

Lining up against the changes are advocates for the business community.

“Faced with an increase in the minimum wage to $15 and the most expansive paid family leave benefit in the nation, Capitol Region businesses do not have the flexibility in their budgets to cover the ever increasing cost of doing business in New York State,” Capital Region Chamber CEO Mark Eagan said in an emailed statement. “Ultimately, due to these new state and federal mandates, businesses will either reduce their hours of operation or they will have to do their staffing differently. Either way this often means they reduce hours of their employees.”

Ted Potrikus, CEO of the Retail Council of New York State, said “There’s a lot to digest” in the new regulations.

“Ultimately you have to see how it pans out, but … the predictions are pretty grim for how this affects the retail industry.”

Zack Hutchins, spokesman for The Business Council of New York State, said Obama’s action was based on a false premise.

“This works under presumption that [employers] aren’t paying people fair wages, and we wholly disagree with that,” he said.

Squarely in favor of the changes is Phillip Steck, a labor attorney who represents employees for Cooper Erving & Savage in Albany and is also a Democratic state assemblyman. He said the issue is not whether the wage for a 40-hour week is fair, but whether the same wage for a 50- or 60-hour week is fair, and whether it is fair to compel managers to work those extra 10 or 20 hours without extra pay.

“There has been a remarkable erosion of worker protection under the Fair Labor Standards Act,” he said, “and companies have been misclassifying workers to a great extent.”

He said one purpose of the FLSA, enacted during the Great Depression as part of President Roosevelt’s New Deal, was to raise the purchasing power of workers and thus boost the economy.

“Overtime is supposed to be a disincentive to work people longer hours,” Steck said. “It encourages employers to hire more people.”

He feels that things like unpaid overtime have “contributed to the decline of the middle class in the United States” and place stress on families, particularly two-parent families.

“We’re working people longer and longer hours in this country,” he said.

John Bagyi, a labor attorney who represents employers for Bond, Schoeneck & King in Albany, said he expects Obama’s overtime changes to take effect over the objections of congressional Republicans and so for months has been advising his clients to prepare accordingly.

“It’s going to be an interesting time,” he said, and may not result in as many boosted paychecks as one might think. “Representing employers, I can tell you employees are not happy about this.”

The reason is that employers can control their labor costs by reclassifying employees, shifting their duties around and changing their flat salaries to an hourly wage that won’t total as much for a 40-hour week.

Bagyi’s advice to his clients has been to determine which employees within the company are affected by the change and decide whether to reclassify them as non-managerial and eligible for overtime, or keep them as managerial and boost their salaries above $47,476 a year, or $913 a week.

In the Capital Region, he expects the non-profit sector to be most affected by the overtime rule change, followed by the retail and hospitality sectors.

Bagyi also sees some positive aspects for employers in the details of the changes announced, as compared with the originally proposed revisions: They will take effect in December instead of July; the salary threshold is $913 a week, rather than $970; and there no changes to the “duties test” — the questions that determine whether an employee is managerial, administrative or professional, and therefore able to be denied overtime in many cases.

Had Obama changed the duties test, the overtime rule revision would have been more vulnerable to challenge, Bagyi said, but as written, “I think it’s quite likely to happen.”

Potrikus at the Retail Council said the overtime regulations raise intangible considerations beyond money.

“What it comes down to is an underpinning concern that this might not be as popular as people think,” he said. “People like to move from being hourly to salaried” as part of career advancement, he said, and the overtime changes will encourage employers to do move workers in the opposite direction.

Bagyi expects these payroll shifts to happen, and for that reason said the U.S. Labor Department prediction that 4.2 million people will suddenly become eligible for overtime may not come to pass.

Hutchins at the Business Council said there’s a cause-and-effect relationship to the regulations foisted on the business community: Each time one expense is increased, another expense must be reduced to compensate, or else prices for consumers increased.

“There are so many things that are increasing the cost of doing business,” he said.

Reach business editor John Cropley at 395-3104, [email protected] or @cropjohn on Twitter.