New overtime threshhold may have unpleasant side effects

An editorial from The Times West Virginian

FAIRMONT, W.Va. — Nearly two months in advance of the new Federal Labor Board’s overtime rules taking effect, Wal-Mart has adjusted the salary of its entry-level managers.

The new rules, which will push as many as 4.2 million workers into the category of drawing overtime pay for more than 40 hours of work per week, increases the minimum threshold of pay for someone who qualifies for overtime compensation from $23,660 to $47,476.

And in response, Wal-Mart moved manager salaries up to $48,500.

Obviously that was a business decision to protect the interests of the company, which employs 1.5 million people across the country.

The company has taken a huge hit for its employment and compensation practices, and has responded by vowing to invest $2.7 billion into wages and training over the next two years. And a lot of that was made possible by eliminating more than 7,000 office jobs within the stores themselves. And as of 2014, it was reported that Wal-Mart’s low-wage employees were costing $6.2 billion in public assistance, including food stamps, Medicaid and subsidized housing.

So it’s probably not the best idea to follow the employment practices of Wal-Mart, which believes it’s a solid investment to eat the $1,000-per-manager increase instead of having to resort to paying overtime for hours worked. That cost will be passed on to consumers, who may not notice that the jar of peanut butter in their cart was $3.88 last week and $3.90 this week.

But that’s Wal-Mart, which can recoup the loss before Black Friday comes around. For millions of other employers, the Dec. 1 rule change is coming fast and it’s impact is unknown at this time.

There will undoubtedly be a major impact, as companies choose whether to push employees past the minimum threshold for exempt from overtime, pay managers for the number of hours worked per week or opt to fill jobs with more than one part-time employee.

It’s going to affect West Virginia, as one-third of current salaried employees will be eligible for overtime. The $47,476 threshold is also very high compared to Marion County’s average annual pay of $39,936 — far below the national average salary of $50,648. This one-size-fits-all rule is likely to have an even bigger impact in Marion County, West Virginia, than perhaps Marion County, Illinois.

Many have touted this change as a way to lift people out of poverty. We’re not sure that will happen, as many businesses are going to have to make changes in staffing levels, hiring for open positions and work schedules. Two part-time employees may be able to do the work of one full-time manager and cost much less money in overtime and benefits.

Twenty-one states have filed a lawsuit saying that these new rules will put an unfair strain on state budgets, and the U.S Chamber of Commerce and other business groups have also filed challenges in federal court.

We absolutely believe that workers should be paid fair wages and work a reasonable amount of hours per week, but we fear that increasing the threshold twice over and giving employers only six month’s notice will lead to some pretty unpleasant side effects.

See more from The Times West Virginian. 


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