Workers, Businesses Ponder What An Increase In Overtime Would Mean

The Obama administration is expected soon to decide whether to increase the number of salaried workers eligible for overtime pay. The move could mean more money in workers' pockets. But some policy experts say the change will have negative effects on businesses. Most workers who are paid on a salary basis - instead of by the hour - do not receive overtime pay for the extra hours they put in. They're called "exempt" employees. They're "exempt" because of their executive, administrative or professional status. They're supervisors, company decision-makers, experts of their field. But some of these exempt employees are fast food and retail managers who make wages far below high-level executives. Under current federal law, a full-time exempt employee who makes as little as $455 a week can work gobs of overtime and not get compensated for it. "The whole point of time-and-a-half was that moderate and low-income workers, who were not in executive positions, would get the benefit," U.S. Senator Sherrod Brown said. Brown said increasing the overtime pay threshold is long overdue. The last time it was increased was during the Bush administration. "A fast food restaurant manager, for instance, might be a salary of $26,000 a year, and while a $13-an-hour worker would get overtime, this salaried worker, who should get overtime and works many, many hours, does not receive time and a half and should," he said. "That was the original intent of the law; it needs to be updated." Senator Brown is among 25 democratic senators calling for a threshold of $56,680 a year. Brown said that figure would make about 47 percent of salaried workers eligible for overtime. Eleven percent qualify now. We talked with a Columbus retail manager who stands to benefit from the revision. He did not want to be named for fear he could lose his job. "Being in retail management, obviously the fourth quarter, there are times where we're required to work an exorbitant amount of time above and beyond the 40-hour work week," the worker said. On average, he said he works about 50 hours a week. He doesn't qualify for overtime. His salary is just under $50,000, and he receives about $3,000 a year in profit sharing. Overtime, he said, would go a long way as he saves for a house. "It would probably mean that I would lose the profit sharing portion of my income," he said. "But I think that would mean a win for me financially." And he's right. He would amass about $19,000 in overtime pay, if he were eligible. But Greg Lawson, a policy analyst with the Buckeye Institute, said there are unintended negative consequences of the proposal. Lawson predicts businesses will cut back workers' hours and hire fewer full-time employees to avoid paying overtime. "Many of them are going to make the decision that it's not really something that they are going to be able to absorb," Lawson said. "They'll simply reduce the hours in order to make sure that the cost doesn't run up on them." "We generally dislike paying overtime if we can help it," Beechwold Hardware human resources manager Eric Buskirk said. Buskirk said the business operates on thin margins, competing with big box stores. He said salary structures likely would change depending on which threshold is implemented. "We might just match to get above that threshold point, or take that person off exempt and make sure they don't work over 40 hours a week." Buskirk said bonuses could go away and instead be woven into salaries, potentially boosting them above the overtime threshold. And he said payroll increases could be passed on to customers. "That's all going to be determined on the market. If the big box stores decide they're going to raise their prices. If they don't then we have to live in that tighter budget," Buskirk said. It's unknown how much the Obama administration will increase the salary threshold. Legislators and various special interest groups have tossed around figures ranging from $42,000 to $69,000. The Economic Policy Institute estimates between 3.5 million and 10 million people could get a boost in pay.