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New overtime regulations get mixed reviews

AP

On Thursday, about 4.2 million Americans were set to get a bump in pay, according to the U.S. Department of Labor. Almost 185,000 of them were Pennsylvanians.

But while getting a raise is fun for most, giving them remains decidedly less so.

As part of new regulations issued by the Labor Department in May, those making $47,476 or less a year were set to become eligible for overtime pay, or time-and-a-half after they’ve worked more than 40 hours in a week, on Dec. 1. The old floor, established in 2004, was $23,660 — or about half of the previous precedent.

But what seems like an early holiday gift for millions of employees remains harder to unpack for the businesses who employ them. On Tuesday, a Texas federal judge ruled against the new regulations, reflecting a growing sentiment among special-interest groups and business owners who say the changes are too drastic and will hurt both employer and employee alike.

The judge’s ruling was only a temporary stay on the new regulations, however, until a definitive measure is reached. For now, limbo remains the norm.

“I think the feeling was not so much that it shouldn’t be increased,” said Janine Gismondi, a shareholder at McQuaide Blasko who focuses on employment law. “The concern was the dramatic increase, to double it all in one fell swoop.”

There are no baby steps here, just one giant leap for human-resource kind. It’s a leap that appears to stretch reason, opponents say, and evinces a disconnect between legislators and small businesses.

In theory, the regulations help underpaid workers — $23,660 is just below the poverty line for a family of four, according to the Census Bureau — receive fair compensation. But opponents argue the effect will be a net negative for employees: Their hours will either be cut for compliance purposes or more employees will need to be hired to make up for the time lost.

The business, as a result, suffers.

“I won’t make any bones about it,” Gismondi said. “I think this is the most confusing employment law in the world.”

‘An enormous adjustment’

That’s not counting the culture shock. Pushing time and money back-and-forth, finding the perfect balance on the abacus — few options seem palatable, many business owners say, under the new regulations.

For instance, the shift may be harder for salaried employees who would have to now keep track of hours, Gismondi said, even when they’re not in the office.

“People who are exempt aren’t usually watching the clock,” she said. “They’re answering emails from home, they’re looking at paperwork. But if you end up as a result of this law treating hourly nonexempt employees who are entitled to overtime, you have got to find a way for them to capture all that time.”

At a Chamber of Business and Industry of Centre County meeting in October, Gismondi and Amy Marshall, a shareholder at Babst Calland, spoke to a group of local business owners and human resource professionals about the new regulations. Several expressed concern, saying the rules hinder employee relations and, in turn, the bottom line.

“There is a stigma with it: Now you’ve made me an hourly employee, you’ve demoted me, now I have to track hours,” Marshall said. “For somebody who has worked at that job for 10 years and has never had to do that, that’s an enormous adjustment. It’s an adjustment for you as the employer, but it’s also an adjustment for them.”

But, a few said, there are benefits. Christine Good, the human resources manager at Goodco Mechanical in State College, said the rules force businesses to reevaluate their job descriptions and efforts regarding compliance. Goodco, a commercial and residential HVAC contractor, was founded in 2008. Since then it’s grown to about 50 employees, though only about two or three will be affected by the regulations, Good said.

Still, it’s good to review. Some believe the hand-wringing can be replaced by handshakes.

“That’s part of the upside of this,” said Jon Guyer, Goodco’s controller. “We’ll reexamine and then re-document our job descriptions.

“It should be helpful for everybody.”

‘The legislators are out of touch’

At the CBICC meeting in October, some expressed umbrage over the divide between Washington and the rest of the country regarding the new regulations.

“The legislators are out of touch with what it does at that very fundamental level,” said one of the members.

While altering the federal minimum wage requires Congressional approval, changing the overtime threshold does not. The Obama administration has pushed to raise the minimum wage on multiple occasions, but has been met with resistance by House Republicans time and again. The latter argue the move would cost jobs; according to the Congressional Budget Office, about 500,000 would be lost.

But the Labor Department cites economic research that finds higher wages are related to lower turnover and, as a result, lower training and replacement costs. Studies by the Economic Policy Institute have found workers today are more productive and better educated, but are making less relative to the wage in 1968. Though cause and effect remains messy, research shows higher minimum wages are related to a reduction in poverty and a boost in job retention and productivity.

After adjusting for inflation, the EPI reported the federal minimum wage in 2014 ($7.25 as it’s been since 2009) was 24 percent below its peak value in the year Richard Nixon became the president-elect.

The most recent president-elect has vowed to undo many of the policies of the outgoing administration, but has remained ambivalent about his plans for the overtime regulations. Donald Trump heavily courted working-class voters on his way to winning the presidency, but now faces a crossroads: go against the party line or risk alienating his base. In August, Politico reported Trump neither opposed nor supported the overtime regulations, and left the minimum wage unmentioned during his economic speech in Detroit.

The president-elect has both supported and opposed raising the minimum wage, changing positions publicly at least five times in the past calendar year. In August, his campaign announced support for raising the federal minimum wage to $10, but preferred letting the states take the initiative.

Currently, 29 states and Washington, D.C. have minimum wages above the federal rate. Pennsylvania is one of 14 states to have the same rate as the federal minimum.

Republicans control both the House and the Senate in the state, but Gov. Tom Wolf is a Democrat. For businesses, the adjustment period remains murky.

“Ignorance is not going to win the day,” Gismondi said. “Maybe on Thursday afternoon they have to work one more hour because they have to get that project done, and they don’t see any problem with that. Maybe that happens once or twice, but how do you manage that situation?”

The path forward, then, is less clear. But just as the current regulations took years to implement — and now face legislative opposition — undoing them will also take time, experts say. All the more reason to stay informed, Gismondi said.

“It’s a whole shift in mindset for the employer and the employee,” she added. “It’s just a total shift in the way you think of them, the way they think of themselves, the way you have to track their hours.

Small businesses are scrambling to keep up. But they’re used to bootstrapping through the ebbs and flows of an uncertain economy, and answering its questions on the fly. Will the election’s outcome affect the new regulations?

It’s anyone’s guess.

“Potentially,” Guyer said. “I think once this kind of initiative is out there and has public support, I don’t see it changing anytime soon.”

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