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Retailers react to white-collar OT prospects

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in Human Resources,Overtime Labor Laws

Retail and restaurant employers will likely respond to the upcoming rewrite of white-collar overtime rules by converting salaried managers to hourly employees, cutting pay, reducing benefits and bonuses and reducing workers’ hours, according to a new study by the National Retail Federation (NRF).

The trade group warned that the proposed new regulations, details of which have not been released by the Department of Labor, could cost retailers and restaurateurs as much as $9.5 billion per year.

In May, the DOL forwarded to the Office of Management and Budget (OMB) its proposed rule for revising the overtime exemptions for executive, administrative and professional employees. Currently, those white-collar employees are exempt from overtime pay if they earn more than $455 per week—about $23,500 per year. OMB approval is one of the last steps preceding release of the rule, which could come this month.

The overtime threshold will probably increase to levels that the NRF study predicts will be unsustainable for small employers. Here are the predicted effects at three proposed new salary thresholds:

$610 per week ($31,700 per year): $1.1 billion annual cost to employers nationwide; 800,000 more workers eligible for overtime.

$808 per week ($42,000): $5.2 billion cost to employers; 1.7 million more workers eligible for overtime.

$984 per week ($51,000): $9.5 billion cost to employers; 2.2 million more workers eligible for overtime.

The NRF said employers are unlikely to simply start paying overtime to more white-collar managers who suddenly become eligible. Instead, they will probably do one or more of the following:

  • Lower hourly rates of pay to leave total compensation largely unchanged
  • Cut bonuses and benefits in order to pay for base salaries higher than the new threshold
  • Reduce worker hours to fewer than 40 per week in order to avoid paying overtime.

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