Oppose Salary Threshold Increase in Proposed Overtime Rule
The U.S. Department of Labor’s Wage and Hour Division has proposed changes to the overtime regulations under the Fair Labor Standards Act (FLSA). The proposed rule would increase the salary threshold for the executive, administrative and professional exemptions from $23,660 per year to $50,440 per year (the threshold for highly compensated employees would increase from $100,000 per year to $122,148 per year). Both thresholds would be adjusted annually. The intended goal of the rule is guarantee overtime pay to most salaried workers earnings less than $50,400 per year and result in higher wages for these workers. However, construction employers are more likely to reclassify impacted workers, limit weekly hours to not more than 40 hours, limit fringe benefits, eliminate some positions, or transition some positions to part time.
Proposed Salary Increase is too Much to Absorb at Once. Any increase in the salary threshold should be phased in over time. Such a large (over 100%) and immediate increase will result in unintended consequences, particularly for small construction companies, construction employers in lower-wage regions and construction personnel.
Salary Threshold Should Take Into Account Lower Wage Regions. A nationwide threshold does not make sense for all employers. Economic market conditions should prevail in higher-cost, higher wage- regions. A salary threshold that appropriately modernizes the regulations to reflect salaries that construction employers are actually paying, or are able to pay would be more appropriate.
Salaries Can Not Unilaterally Rise, as Predicted by DOL. The administration believes employers will simply raise salaries of impacted workers to the proposed threshold, which is not a practical option for the construction industry. Construction contractors operate on slim profit margins and cannot afford to increase salaries of all affected employees up to 100% overnight.
Construction Employers will be Forced to Take Drastic Measures to Comply with Rule. AGC survey results of human resource professionals of construction employers have identified measures employers will have to make to maintain their compensation budgets. These measures include:
- 74% would likely reclassify some or all of the impacted exempt works to non-exempt hourly status at their current salaries.
- 60% expect the proposed rule to result in the institution of policies and practices to ensure that affected employees do not work over 40 hours a week.
- 40% expect affected employees to lose some fringe benefits.
- 33% expect some positions to be eliminated.
- 23% expect to exchange some full-time position for more part-time position.
- 80% expect employee moral to be damaged because employees who are reclassified to hourly, non-exempt status will feel as if they have been demoted despite eligibility for overtime pay.
Urge your federal legislators to support the Protecting Workplace Advancement and Opportunity Act. It will require DOL to perform a deeper analysis of the impact the proposed rule will have on employer costs, employee flexibility, and career advancement before proceeding with a final rule.