The U.S. Labor Department recently released its long-awaited overhaul of federal overtime rules. Unfortunately, these changes will negatively impact many of Nebraska’s small businesses and will place new undo restrictions and burdens on Nebraska employees. Essentially, the new rules will instantly transform thousands of salaried jobs in our state into hourly positions, resulting in less flexibility for workers and increased costs and administrative burdens for small businesses as well as colleges and universities, nonprofits, and public sector employers that operate on fixed budgets.
When these new rules take effect in December, many small businesses across Nebraska, including our hometown banks, will suddenly be forced to reclassify numerous technical, management, and other professional employees from salaried to hourly. Eligible workers making less than $47,476 per year ($913/week), up from the previous limit of $23,660 per year ($455/week), will be eligible for overtime once those employees have worked 40 hours in a week. These newly reclassified employees will face increased restrictions on the hours they can work and how they use technology in their work lives as well as losing much of the flexibility they have enjoyed managing their work/life balance.
Newly classified employees, for example, may find it implausible to attend a child’s kindergarten graduation ceremony during the work day, as the new overtime rules will require the formerly salaried employee to potentially make up the time away from the workplace. Employees also will face more limited opportunities for advancement, training, travel, and community engagement. Employers will now be forced to pay overtime, for instance, for hourly workers who take on a community activity like Junior Achievement or the local volunteer fire department.
Nebraska’s hometown banks are deeply concerned about the unintended consequences of a massive, one-size-fits-all, overnight regulatory overhaul with such a narrow implementation window that will impose serious hardships on our Nebraska employees and businesses. Managing a small bank branch, for example, requires only a handful of formerly salaried employees who wear many hats in a very family-oriented work environment. The new rules will force these branches to be much more specific about where and when each employee may work, resulting in a more stringent company culture.
Although some employees may see modest increases in income, most will not. Employees reclassified from salaried to hourly will now be eligible for overtime pay but, in many cases, employers will adjust their operating environment to limit these new overtime costs. Thus, employees will simply be subject to more restrictions on work schedules. More employees also will be punching time clocks and will be forced to limit their work technology usage outside of regular business hours. In some cases, employees may even see a reduction in benefits as the Department of Labor rule serves to downgrade the status of their jobs. As an example, a newly reclassified employee that previously checked his or her work email or social media on an employer-provided smartphone may now find that their employer will stop offering access to this non-work time technology as the time spent reading an email will now result in hours on the clock. These new rules specifically fly in the face of how the Millennial generation likes to work and interact. Why would we want to hold back the most influential population in our market today as they graduate from college and reach their peak employment years?
Importantly, Nebraska banks also believe the rule’s one-size-fits-all approach will result in its associated administrative and labor costs falling disproportionately on those businesses in cities and states with lower costs of living. Salary standards more appropriate for New York City will be applied uniformly across the nation in urban, suburban, and rural locations like Nebraska. This blanket approach does far more harm than good for both employers and employees.
We recognize the good intentions of the bureaucrats who drafted these new rules, but their one-size-fits-all approach is simply not sensible. While hourly pay is appropriate for certain jobs, one national standard designed for New York City is inappropriate for all jobs in all parts of the country. That is why Congress, when it wrote the labor standards law, created reasonable exemptions to the overtime pay requirements.
Thousands of public and private sector employers in Nebraska and across the country have expressed concern with the new overtime rules. Additionally, members of Congress and even the Obama Administration’s own Small Business Administration (SBA) have urged the Labor Department to take a closer look at the economic impact on small businesses, nonprofits, and local governments before issuing this rule. The SBA specifically warned the Labor Department in a letter last September about the rule’s troubling compliance costs and paperwork burden on small entities, noting that the Labor Department had underestimated compliance costs.
The NBA is asking the federal government to take a closer look at the impact of the rule on small businesses, on communities all across the nation, and upon the employees, especially Millennials, who will be affected in many unintended ways. We urge our state and local representatives to make their voices heard in Washington and in the White House. A good first step is passing the Protecting Workplace Advancement and Opportunity Act, which would simply give the Labor Department additional time to conduct a more comprehensive economic analysis on the impact of mandatory overtime expansion on small businesses, nonprofits, public employers, and their employees. It will be easier to get this regulation right the first time rather than try to fix the mess that is certain to come due to the inflexible approach currently on the table.
Richard J. Baier
Proud husband, father of two, and the president/CEO of the Nebraska Bankers Association (NBA). Avid about growing the Cornhusker State's banking industry.