Why entrepreneurs should prize accurate over clever when it’s time to hire.
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These days, you’re as likely to see a job listing for a “product ninja” or a “sales rock star” as you are for a cut-and-dried position like human resources manager or marketing associate. Part of this is a reflection of the more casual, flexible nature of work today. Soft skills are extremely valuable in the information economy, as is the ability for workers to step up and take on a variety of different responsibilities at work.
Plus, attention is valuable, even the attention of job seekers, and there’s no quicker way to get attention than to make it seem as if the job you’re advertising isn’t like other jobs. But this trend is playing right into the hands of a significant risk to employers that many are overlooking.
It all relates to recent rule changes issued by the U.S. Department of Labor that raised the threshold for overtime pay. Starting in January 2020, all employees who make less than $ 35,568 per year will be eligible for mandatory overtime pay of 1.5 times their regular pay rate when they work more than 40 hours per week. That’s an increase from the current threshold of $ 23,600, originally set in 2004, though well below the threshold of $ 47,476 that was suggested during the Obama administration, before being fought down by several states and business groups.
Think that impact will be minimal? First of all, economists expect it to change the overtime status of roughly 1.3 million American workers across all industries. Consider the retail store manager who makes $ 35,000 per year and is asked to come in early and stay late before every shift to set up. Now, all of those extra hours will be eligible for mandatory overtime. The same holds true for a construction foreman at $ 30,000. They may have been exempt from any overtime up until now, but soon all of the extra time they spend on the job site making sure timelines are met and budgets are kept will qualify them for significantly more income.
A Shifting Landscape for Employers
This rule change is just one new challenge facing employers. It’s been a busy year, even by the standards of the typically active halls of employment law, from the presidential campaign trail — where both Elizabeth Warren and Bill de Blasio based much of their platforms on employee rights — to localities all over the country where sweeping changes are being considered.
For instance, California’s new law, known as A.B.5, will soon force gig-economy businesses like Uber and Lyft to treat their workers as employees instead of independent contractors, with all the benefits and protections that go along with that designation. But, despite the fact that this law and a number of $ 15-per-hour proposals have been getting all of the headlines in employment law this year, this new decision from the Department of Labor may be far more consequential, and far sooner.
A.B.5 will likely be tied up in potential wrangling or litigation for years, and even once sorted will only ever impact workers in one state. But the overtime rule change has been made. It’s happening in January whether businesses like it or not, and it is going to have an outsized impact on small and medium-sized businesses in particular, precisely because they don’t have the resources to dedicate to this kind of compliance.
Larger companies monitor employment regulations constantly as they adjust their costs and make changes to broadly affect employee morale. Smaller business owners like middle market retailers and restaurant owners, on the other hand, are in danger because they don’t feel this change and assume they’re protected. That’s just not true, and as I’ve argued before, that ignorance can be lethal to a business.
Related: 6 Ways to Find and Recruit Talent
Making Sense of It All
Even those companies that think their workers are all exempt from overtime pay are at risk, because this is not an easily understood area of the law. Whether or not an employee can be classified as overtime exempt or non-exempt is based on more than just their salary. Their duties play a role as well, and if the job doesn’t involve substantial executive, administrative or management tasks, they may still classify as non-exempt above and beyond the new $ 35,568 threshold. Even their education level, in the case of professionals, can impact an employee’s exemption status in the eyes of the law.
But, confusing or not, employers must address these regulations. Plaintiff’s attorneys nationwide are already lining up the companies they’re going to target and how they’re going to attack, and it’s the companies that currently have their heads in the sand that will be hurt the most.
Rather than ignore the risk, the time is now for employers to take steps to prevent getting in trouble once the new regulations arrive. That starts with verifying which workers will and will not qualify as overtime exempt after January, ensuring non-exempt employee hours are being properly tracked and making sure all job listing are detailed and accurately reflect the work that will truly be required. Because that “rock star” job listing, while attention-getting, might get you attention of a different kind come January.
John Shunk is a partner in Messner Reeve’s Labor & Employment practice group.