Millions of U.S. workers could become eligible for overtime pay under an expected federal proposal that would change labor law, but business leaders warn that the additional rules would be costly and burdensome.
For White Castle restaurants, where the average hourly employee makes $9.78 per hour, the company would incur an extra $8 million to $12 million annually, Jamie Richardson, vice president of White Castle Systems, told the House Committee on Education and the Workforce in a hearing on Wednesday.
"The new regulations will only result in more complicated laws," and eventually more lawsuits, Richardson added.
Currently, federal law requires that salaried employees be paid time-and-a-half for overtime only if they work more than 40 hours a week and earn less than $455 a week, or $23,660 a year. Certain other types of workers, including those classified as professionals, administrators or executives, are ineligible for OT pay.
In practice, that means workers who make slightly more than the maximum allowable income or who are otherwise categorized as exempt may end up putting in much more than 40 hours a week on the job without additional compensation.
As a remedy, the U.S. Department of Labor is expected to soon propose raising that income threshold to as much as $52,000 a year.
Changing the threshold to $51,000 annually would merely be adjusting the rate for inflation since the cutoff was last adjusted in 1975, said Seth Harris, the former U.S. Deputy Secretary of Labor, in the hearing. Raising the cap to $51,000 from $23,660 would cover an additional 6.1 million workers, he said at the hearing. That's the same number calculated by the nonprofit Economic Policy Institute, which has urged the Labor Department to change the rate.
"The folks who have gotten left behind are the ones who are going to benefit," said Rep. Mark Takano, D-Calif.
For all restaurant and retail businesses, the change would cover about 2.2 million workers, according to a May report by Oxford Economics commissioned by the National Retail Federation. The combined annual tab for those businesses would reach $9.5 billion if the cutoff was changed to about $51,000, according to the report.
At Wednesday's hearing, Rep.Tim Walberg, R-Mich., said changes are needed to the Fair Labor Standards Act of 1938, which he said is difficult for well-intentioned employers and workers to understand. He referred to a Government Accountability Office report that found that since 1991, the number of FLSA-related lawsuits filed has increased by 514 percent.
Among these court battles is litigation by workers asking to get paid for the time they're required to answer emails and texts. By most accounts, those after-hours tasks are increasing. One high-profile suit settled in 2010 resulted in T-Mobile US (TMUS) paying employees who had been issued BlackBerrys and were told to field customer calls even when they were not scheduled to work.
On the weekends, a typical employee works one to two hours on a company device, while 30 percent to 40 percent rack up three hours on the devices, according to a Sapience Analytics study of 8,000-10,000 of its software users picked randomly. Sapience ran the analysis earlier this month for CBS Moneywatch.