Park City businesses on the clock to deal with overtime rule
October 28, 2016
A change to the U.S. Department of Labor's federal overtime regulations is coming soon, and it could have a major effect on businesses in Park City.
The change, set to go into effect Dec. 1, means employers will have to pay salaried workers who make less than $47,476 annually overtime pay for time they work beyond 40 hours a week, up from the current mark of $23,660. For employees above that salary to be exempt from overtime pay, their job descriptions and duties must meet certain management or administrative criteria.
Employers are already required to provide overtime pay to hourly workers.
The Department of Labor is touting the new regulations as a boon for millions of workers who will now receive pay for overtime or will see a reduction in the amount of hours they're asked to work. But Mark Wagner, an attorney at the law firm Prince, Yeates and Geldzahler in Salt Lake City who specializes in employment and labor law, said the new regulations may represent a major — and perhaps difficult — shift for small businesses.
"Small business in general, as opposed to the bigger employers, are going to bear the brunt of this because they tend to have greater percentages of their workforce that are the types of employees who would be affected by this change," he said. "They also tend to have tighter budgets and less workforce to draw on if they need to reallocate or shift duties or whatever."
Wagner said the regulations could hit nonprofits, restaurants, retail shops and lodging properties the hardest — industries that make up the majority of the Park City economy.
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"It's going to affect cities that have a high percentage of those businesses," said Wagner, who is scheduled to address the topic at a Park City Chamber/Bureau workshop Nov. 8.
Businesses that must adapt to the new law are up against several challenges, Wagner said. First, they'll have to spend resources examining their workforce to identify any areas where they won't meet regulations. Then, if they do have issues, they'll have to determine how best to become compliant. Obvious options include raising pay for affected employees above the $47,476 threshold, cutting their hours to below 40 per week or reclassifying them as hourly employees.
But for companies with tight budgets and limited resources, all of those options could be painful. Businesses may find it difficult to shell out for greater pay — especially because salary changes can also affect benefits. But for companies with limited manpower, it could also be hard to restructure resources to ensure employees don't have to work overtime.
Maxine Turner sits on the board of directors for the U.S. Chamber of Commerce, a group that has been grappling for months with how the new regulations will affect small businesses. She is also the owner of Cuisine Unlimited, a catering company that operates in Park City and Salt Lake City, meaning she has had to confront the issue herself.
In preparation for the new regulations, Turner evaluated the roughly 10 salaried workers she employs — the company has about 150 employees overall — and decided the only feasible option was to convert them to hourly pay. That means she will pay them time-and-a-half for any overtime they work each week, but even after that, their yearly pay will fall below the $47,476 salary threshold.
One difficulty for those employees, though, is the prospect of imbalanced salaries throughout the year. During the busy season, they'll work more than 40 hours a week and receive overtime pay. But when business slows, they may not work full-time hours.
As salaried employees, they could rely on a set wage, regardless of how many hours they worked, but now they will have to save up for the slow season, Turner said.
"We are a very cyclical kind of company," said Turner, who is also on the Park City Chamber/Bureau's board of directors. "Between now and the end of January, we're extremely busy. So they're going to get a lot of overtime. But come February, March, sometimes into April, they'll be lucky to pull 30 or 35 hours."
Additionally, classifying those workers as hourly employees has been "demoralizing" for them, Turner said.
"People who go from salaried position, which is more management-level, back to hourly, they feel bad about it," she said. "We've really had to offer some internal incentives and some perks to them so they don't feel so bad about this. But it's hard on them. To say that you're a salaried employee means a lot."
Turner said companies throughout Park City will be forced to make similar decisions regarding their employees.
"This affects every company, no matter how small," she said.
For more information on the new federal overtime regulation, visit the Department of Labor's website at dol.gov/whd/overtime/final2016. Additionally, the Park City Chamber/Bureau is set to hold a workshop on the topic for local businesses. That is scheduled for Nov. 8, from 11:30 a.m. to 1 p.m., at the Park City Library.