Expected new state rules on overtime pay likely to come with additional costs

May 22, 2019
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Written by Washington Retail
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Separate moves by the U.S. Labor and state Labor & Industries departments to update overtime eligibility rules are likely to come with burdensome new costs for retailers.

The federal Labor Department proposed expanded eligibility in March. Bruce Beckett, Washington Retail’s contract lobbyist, expects state Labor & Industries to propose separate, expanded eligibility in June.

Put simply, Washington Retail has been urging L&I to mirror the federal Labor Department’s proposal so that businesses operating in the state don’t have to adhere to two different standards. So far, it appears that L&I is operating independently in its study into updating eligibility rules.

Washington Retail has been urging care and restraint so as to minimize financial impacts on business. Faced with higher costs, businesses often must respond with fewer available work hours and reduced hiring, or worse, layoffs that sour the economy.

WR has additional concerns it has expressed on the state and national level. A “one sizes fits all” standard as envisioned will not account for vastly different wage levels between Seattle and rural parts of the state. Further, exempt employees who would need to be reclassified as non-exempt as wage thresholds rise would then go from salaried to hourly status, which could weaken morale in many workplaces.

The National Retail Federation (NRF) commissioned a 2016 study of potential financial business impacts during the Obama Administration of expanding overtime pay eligibility.

Key findings by Oxford Economics were:

  • Nearly one-third of affected workforces would convert to hourly from exempt salaried.
  • About 20 percent of workforces would earn more overtime pay, but employers would lower base wages to compensate.
  • About 11 percent would see reduced available work hours.
  • 5 percent would see salaries raised but would see an equal reduction in bonuses and benefits.
  • Nationally, it was estimated that retailers and restaurants would spend $745 million to comply with the new federal regulations.

On March 7, the federal Department of Labor announced a proposed rule that would make more than a million more American workers eligible for overtime. Under currently enforced law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. NRF has submitted comments on the proposal. WR will use outcomes from the federal debate to shape its strategy regarding the state expansion of overtime eligibility.

This newsletter will report details of L&I’s proposal later this year and follow the issue to its conclusion.