No ones been talking about this one in my circles, I was wondering if other people have heard or if I’m misreading the law. It will go into effect on December 1, 2016
The Labor Department is raising the minimum for salaried employees to $913 per week, $47,476 per year. It is currently $455 per week.
This will certainly effect many in retail and food service. While the box box store managers and restaurant managers probably make more than 50k a tear I doubt many at the smaller stores managers do. Assistant managers and salaried team leads are unlikely to hit that threshold.
I expect a lot of people will just get moved to hourly. And a lot of people end up working less hours so companies can avoid paying overtime. I don’t know if this will be beneficial to those employees or not.
A friend of mine today who has a few salaried employees, including herself as an LLC, just heard about this coming into effect. She and her employees don’t make the new minimum. Her employees only work 40 hours a week to begin with so she’ll be changing them to hourly. She works well over 40 hours a week but there doesn’t seem to be a way to pay herself a consistent salary without simply inputting hours other than what she actually works. As she’s her own employee I doubt anyone would make a wage claim.
Were you aware of this? Does it impact you? What do you think the effect will be?
First, I believe there is an exemption for business owners who own more than a certain percentage of the company , so your friend probably won’t have to keep records of the hours she works.
The effect will be the same as any other law- it will help some people and hurt others. First off, almost no one’s pay will have to be raised. The McDonald’s assistant manager who works 70 hours a week for $24,000 will need a raise, because he’s making less than minimum wage when it’s calculated on an hourly basis. What will likely happen in many cases is the company will calculate which hourly wage will result in the same pay for the same number of hours. For example, if someone currently works 50 hours a week and is paid $825/wk, they would have an hourly wage of $15. 40 hours is $600. OT rate is 22.50. 10 hours is 225- same total of $825. There will likely be a loss of flexibility at some jobs, although the law doesn’t require it. There’s no rule that says a company can’t pay you for 40 hours if you work less - but a company that has to pay extra for overtime is likely to require you to use PTO or unpaid leave when you take off 2 hours for an appointment. But lots of companies require the use of PTO even for overtime ineligible employees , so that may not be a big change.
It is unlikely that anyone will have their actual pay reduced. Most people will either have their hourly wage set so they are working the same number of hours for the same pay, or their wage will be set so that they work 40 hours for the same pay.
Assuming 185 days @ 6 hrs per day getting paid $30/hr is less than $35,000/yr.
As for the OP, I think the big change will be for companies to stop abusing salaried “managers” to escape paying people who really do perform the work that should be paid hourly.
The latter is potentially a HUGE benefit to the underpaid retail or food service manager who is working 70 hours a week with no overtime pay, in some cases leaving them below minimum wage if calculated by the hours they are currently actually working.
This is one of the rare wins for labor that we hardly ever see these days. Salary exempt once meant you were paid like a professional and if your job needed a little extra here and there, you were well treated and well compensated for it. But as companies push harder and harder to exploit people, it simply means they’re trying to get away with making you work routine overtime and not paying for it.
Professionals making $50k a year won’t be affected. If you’re making less than $50k a year, you probably shouldn’t be salary exempt. Which isn’t to say you shouldn’t be salaried - as I understand it, you can still make a salary but be paid overtime. Not having to pay overtime is what this is targeted at.
It’s ridiculous that we’ve allowed it to become routine for companies to attempt to make us work unpaid overtime, and this is considered normal, and if you don’t shut up and take it, you’ll get fired and replaced by someone who will. We’re more productive than we’ve ever been, and yet the way we treat and pay our employees is heading towards the trash.
Most of the people whom will now get overtime were actually illegally marked as exempt in the first place.
As an example, the employee must also receive the same salary every week, regardless of how many hours the employee works or the quantity or quality of the work the employee does.
Yet most of these people would have been docked if they took an extra hour for lunch or didn’t produce.
Due to job titles I have been “exempt” for the most of the past 3 decades but I also hold the company to their end of the bargain too. E.G. Call me up on a vacation day to ask questions, that is no longer a vacation day. I feel sick after the first half hour an honest attempt to go to work, not taking any sick time.
These types of behaviors are not available to individuals whom have a less rare skill set and so the DOL laws are realistically the only way that they will have access to redress what has been a very anti-worker situation.
If someone has fixed hours, is doing manual work and cannot directly fire the people they are managing not paying them overtime is almost always illegal but fairly safe because these workers do not have the resources to act.
I see this is as more positive than negative. People will point out that companies will simply switch fast food managers over to hourly, but I see no problem with that. The real problem has been that managers of retail shops and other businesses work ridiculous hours for low pay. This forces businesses to do one of two things: make the time on the job worth more, or reduce the time they spend on the job so that they actually have time for things like…a life.
Yes, I was aware of it, no, it doesn’t impact me. Do I think employers will just cut hours? Maybe. But I think the larger effect will be an upward movement in real wages, in net. Albeit it a modest one.
Take a typical say, Burger King. You have a full time manager who probably makes around $30,000 a year starting out, or maybe $40,000 for a long time manager at a more progressive franchisee who tries to reward his people. You’ll have maybe 1-2 assistant managers who probably make local min wage + $2/hr, or so. Then you’ll have the rest of the crew most of whom make minimum wage, with a few potentially earning $0.25-0.50/hr more than minimum wage based on longevity (rare.)
So this law change is really only going to affect the store manager, whose actually paid salary. The entire rest of the staff are all already hourly.
The store manager probably works 50-55 hours a week. Now, is the franchisee going to bump his manager up to $47,500/yr to avoid paying them overtime, convert them to hourly and reduce their hours to 40, or convert them to hourly and keep them working 55 hours a week?
Well, let’s break the math down first:
Current Salary (guesstimate): $34,000/yr. This is “$16.35” equivalent if you work a “normal” full year of 2080 hours. [It’s $11.88/actual hour of worked assuming 55 hours a week.]
Converted to Hourly, Remaining at 55 Hours, keeping their “base pay” for 40 hours/week the same (i.e. $34,000 yr base pay): This increases the labor cost of the store manager from $34,000 a year to $53,125. That’s $34,000 in base pay, plus $19,125 in overtime (due to working 780 hours of annual overtime.)
In this scenario, it makes more sense to just raise the managers base salary to $47,500, and keep them working 55 hours a week. We’ll call this Option A.
Converted to Hourly, Remaining at 55 hours, and lowering their hourly rate to the “effective” hourly rate they work at now ($11.88/hr.): This lowers their base pay to $24,727 a year because you’re basically saying that “before” they were making $34,000 a year for working 55 hours a week, so you’re lowering their “base pay” when you convert them to hourly. With them still working 780 hours a year in overtime ($13,909/yr) that leaves their total labor cost as $38,636. We’ll call this option B.
Converted to Hourly, Reduced Hours to 40 hours, and keeping base hourly rate the same ($16.35): Total labor cost stays the same, but effective labor cost per hour goes up. You also lose 15 hours of the manager’s labor per week, assume you can replace it by 15 hours of extra minimum-wage crew staffing. We’ll call this option C.
Converted to Hourly, Keep Hours at 55, reduce base hourly rate low enough that with 15 hours of overtime, they still only make $34,000 year: ~$10.50/hour. This keeps labor hours the same and total labor cost at $34,000 year.
I think these would be the four major options. Most owners/bosses are not going to outright lower total compensation, so I’m assuming the “floor” for compensation will be $34,000. I think Option C is actually a non-starter. Why? Because fast food managers, while they may do crew work, do a lot more. They typically are working an extra 10-15 hours a week not solely because they’re salaried and thus they cost “nothing” to work extra, but because they often assume responsibilities normal minimum wage, transient crew are not trusted with. Making bank runs, opening the safe to make change, doing invoicing/placing orders, working out staff scheduling, managing staff, hiring staff, firing staff, training staff etc. The reality is it’s a false assumption you can just replace 15 hours of store manager work with 15 hours of crew member work.
So that leaves us between options A and B and D. I actually think D is a non-starter as well. While the store manager thinks of their pay as a salary, and may not “think about” their “effective hourly rate”, if they’re told they’re being converted to hourly and at like $10.50 an hour (only 21,840 a year base pay assuming 40 hour weeks), I think most store managers will not be happy. Additionally, it’s unrealistic to assume 55 hours every single week, some weeks they will work less. For this reason they could see a reduction in take home wages some weeks. While the owner certainly “could” do this, business owners are honestly usually loathe to just outright reduce compensation for already satisfactory employees. In fact many businesses will do a layoff before they’ll do a pay reduction. There are good management reasons for this–employees respond very poorly to a reduction in wages.
So I think the realistic options are A and B. Both of which are an increase in real wages, B is a moderate one, and A is a significant one. I think you’ll see businesses do both, with probably a “weight” towards B, but the number doing A won’t be insignificant.
I think a more likely scenario is to keep the manager at 40 hrs per week and then give 15 hrs a week to an assistant manager. That makes more sense than paying a manager an extra 13 grand to work an extra fifteen hours a week. If the assistant manager makes an extra 2 dollars an hour that is a great bargain. Then the manager does not get a raise for several years until everything is back to the status quo ante.
I don’t think it’s really that likely. At most fast food franchises I’m familiar with the Assistant Manager is typically just a crew member who has been there a longish time, they usually aren’t someone the owner is going to trust with a lot of the work the store manager does.
Do you think option B would cause managers to tend to move to franchises that use option A? Since as you say they don’t always work 55 hours a week, I think they would compute their effective hourly rate as salary / 40, and would thus feel they are getting a cut even if they are actually getting a raise.
And I thought a lot of the objection to the current system is that so-called managers spend a lot of time doing non-management things. Do you think that without free overtime, there would be less jumping on the grill when needed?
It has indeed been a long time since I’ve worked in fast-food, but the store manager (or general manager) doesn’t work from 6am-2am 7 days a week- so the assistant managers (there were 4 or 5 of them) did actually open the safe, train and manage staff , did some of the scheduling and were generally in charge of the restaurant during the shifts they were working. ( They aren’t “assistant” because another manager is there at the time.They are “assistant” to the one manager who oversees the whole operation) Were you thinking the assistant managers are the same as crew chiefs or supervisors? who IME were just more experienced crew members who were paid a little more and didn’t open the safes etc.
Oh and plenty of franchisees/owners of independent restaurants do pay the assistant managers a salary - that’s one of the issues with the current FLSA rules.
I deal with a lot of big box, retail, food service and hotels in my line of work (I work with helping people get off of public aid) and while this rule doesn’t apply to almost all my clients, I have had a lot of conversations about it with the managers.
Almost all of the above businesses will simply limit hours and hire others. I’ve had five people come into my office complaining the stores have taken their exempt jobs where they work 50 hours and cut them into two 25 hour a week jobs. Thus no one gets OT and as an undesirable effect they are making a lot less money.
I have the sneaking suspicion this was the real motive behind it, to create more jobs, and not caring if the extra job was part time. But instead of one full and one part time, due to insurance and other cost, you wind up with two part time jobs.
Add to that the people that are now working 50 hours a week are going to get a bump in their hours worked.
I am for the rule, mind you, I think it’s unfair not to pay people OT, but I think there will be a lot of unintended consequences.
I think a better rule would be to simply implement an OT after 8 hours, instead of 40 hours, rule, would have helped more non-exempt people.
I don’t think most of these companies can so easily just create new jobseekers. We actually have relatively low unemployment at the moment, and with the super-high turnover in the affected industries it’s not at all unlikely they’d have a seriously hard time finding people that they could keep there, especially because they’d be looking to hire minimum wage people to do it. They could certainly cut hours and implement higher wages lower down the line, which actually would still be a win for the managers–they get 15-20 hours of their lives back every week, something with significant economic value, and more people get jobs that pay more than minimum wage.
But if your business model is reliant on a stable, reliable employee putting in 45-55 hours a week, you won’t get that out of minimum wage workers in retail and fast food, just not gonna happen.
What the optimum threshold is, or whether we should have one at all, I don’t know. But it seems overly disruptive to wait so long before bumping it. I read some explanation as to why they don’t just index it to CPI, but I don’t recall where or what the reasoning was.
Some science professors are complaining that they’ll not be able to hire postdocs. Depending on the field, that can pay under $35k/year for 70 h/week of work. Although IIRC the average is more around $40k and can be over $70k. But what the fully loaded pdoc costs vs a grad student varies based on tuition, benefits, indirect costs.
I have no idea who looks at people saying “this rule is bad, we can no longer make people on 30k salary work 70 hours a week” and thinks "huh, he’s got a point, I guess we shouldn’t do it. Are we supposed to sympathize with the people who no longer get to pay salaried people minimum wage or below?