New OT Rules Will Affect You

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If you have salaried managers at your climbing facility that work overtime, either routinely or for special occasions, you may be paying more in wages come December 1. A new rule handed down by the Department of Labor allows everyone making less than $47,476 eligible for overtime automatically, regardless of their job duties.

The DOL created the rule to provide a better deal for underpaid, overworked salaried managers and other “white collar” employees currently exempt from overtime pay. In the climbing gym business, this new rule will affect site managers, assistant managers and even some head routesetters.

Overtime may not be a day to day issue, but climbing gyms regularly host special events like competitions, member parties or even special groups like lock-ins. And if you’re a gym that is expanding locations you may want to think twice about the added workload of your managers. These extra hours worked could put a pinch on your labor costs and force employers to dig deep into the Fair Labor Standards Act (“FLSA”).

Tough HR conversations

Mid-level salaried positions within a climbing gym are still a rarity but have been gaining in popularity as gym’s have become more profitable and the responsibilities of certain positions have become more professional. That momentum could all change with these new rules. More gyms may opt instead to keep assistant managers and head setters at an hourly pay and thus avoid the overtime rule. That’s because once their pay comes close to crossing the overtime threshold, the threshold may go up again. It’s currently scheduled to go up every three years.

Many view earning a salary as a rite of passage — after years of punching a time clock, they feel they’ve finally reached professional status. But, even if these workers remain salaried employees and previously been treated as exempt from overtime they will now have to track hours worked, break times and meal times.

This perception problem puts the onus on HR and employees’ managers to evaluate individual situations and find a way to assure employees they’re not being “demoted” or “losing status.”

“Today’s overtime rule will reduce valuable middle management positions … [It] breaks the basic American bargain: If you’re willing to work until the job gets done, you can quickly climb the career ladder,” Alfredo Ortiz, head of the Job Creators Network, a business trade group told CNN Money.

What You Can Do

According to The Labor Department, the overtime rule simplifies and modernizes the nation’s overtime regulation − to ensure that extra work means extra pay.

There is a misperception that there is only one way for employers to comply with our new our new overtime rule when they have white-collar employees who earn less than $47,476 per year: change them from salaried to hourly employees. That is just not true.

First, employers have a wide range of options for responding to the changes to the salary level. Employers can choose the one that works best for them. Options include:

Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.

Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!

Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.

Hrmorning.com notes that companies are facing a crisis of compensation and need to ask one important question: Do we expect newly non-exempt employees to be as productive working strict, 40-hour workweeks? (Note: This is assuming you’re not going to leave the door open for them to collect overtime on top of their regular pay.)

If your answer is no, that begs three more questions:

  • Will you decrease their pay and allow them to work OT to catch up?
  • Are you willing to be lenient and allow them to work some overtime? or
  • Will you lessen their workloads?

No matter the determination you arrive at, it’ll require a carefully-crafted conversation — and that goes double if you’re taking duties off of someone’s plate.

Ultimately, the most important thing for small-business owners to remember is to take proactive steps to prepare for compliance come December. According to Workforce.com, business owners should evaluate their organizations to better understand which employees may be affected, consider implementing time and labor tools that monitor their employees’ hours, and determine any changes they may need to make to ensure compliance.

Kara Maciel, the labor chair of Conn Maciel Carey PLLC’s Employment Practice Group, shared insights with Club Industry on the rules’ potential impact on the health club business in a recent webinar.

Maciel noted that many low-level managers and assistant managers may automatically be disqualified from exempt status unless their salaries are increased to meet the new salary threshold. This could lead to significant increases in labor costs for a health club business, Maciel said.

To prepare for the rule, which was a proposal in April, Maciel said clubs should:

  • Audit the exempt classifications of the current workforce to ensure they meet the current requirements;
  • Pay special attention to those who are close to the salary threshold and those who hold “assistant manager” or “supervisor” type positions;
  • Review policies regarding overtime and hourly tracking systems as a result of the increased number of employees who will be entitled to overtime.

Bad for Business, Good for the Economy

As mentioned in the video above, employers are not happy with the new overtime rules. Labor costs are the single biggest expense almost all business face and this new rule will only make this worse. In addition to extra costs it will put an administrative burden on HR to keep better time clock records and of course could dishearten hard working employee.

But according to Goldman Sachs, total employment in the US in 2017 will increase by about 100,000 jobs as a result of this new rule. The idea is this: Companies whose workers are covered by the rule will try to avoid paying overtime, and they’ll hire additional workers to do this. The point is to keep from asking their existing employees to work more than 40 hours a week.