The Bureau of Labor and Industries in Oregon is putting forth a new interpretation of a rule that requires manufacturing employers to pay the combined total of daily and weekly overtime in a single workweek to its employees, according to the Oregon Business Report.
This is a complete turnaround from the previous rule, which stated that employers had to pay only the greater of the daily or weekly overtime in a workweek.
“You don’t pay the greater of either method, you pay both methods,” says NFIB/OR State Director Anthony K. Smith. “You’re paying overtime twice – on the same hour that was worked.”
Oregon businesses, particularly manufacturing, mills and factories, already feel the heat from this rule change. And one business is taking a stand.
NFIB member and president of A.R.E. Manufacturing Alvin Elbert wrote in an email to express his and his business’ concern on paying both the daily and weekly overtime rates, saying the interpretation has substantially increased the company’s overhead costs and hurt their ability to succeed in a highly competitive marketplace.
“Due to the BOLI requirement,” Elbert writes, “we must pay double overtime when employees exceed 10 hours a day and 40 hours a week. Our average overtime rate for a machinist is $45 an hour—doubled this becomes $90 an hour. Our shop rate charged to customers is only $80 an hour.”
His company can’t make a profit if it pays employees more than what it charges customers, Elbert says. “We expect this overtime requirement to cost us up to $3,700 annually,” he continues. “This amount is assuming we continue restricting employee overtime. Using historical overtime hours, our cost would be closer to $7,500 to $10,000.”
Besides the cost burden, Elbert writes that the new overtime rule also affects the flexibility of his workforce.
“It is common in manufacturing to have an employee work more than 10 hours in order to complete a project, such as machine setup for production the next morning. However, because of the steep cost of double overtime, we are restricting employees’ workdays to no more than 10 hours. This means that on a daily basis we lose production time to projects that could have been easily finished the day before. Currently, no employee is allowed to work over 40 hours per week. In a company that rewards hard work and thrives in getting a job done, this overtime ban is unprecedented.”
NFIB is supporting legislation to clarify Oregon laws that govern overtime pay to bring the long-standing practice of paying the greater of either daily or weekly overtime back into alignment with the law, without room for future agency interpretations. To be on the safe side until then, Oregon manufacturing employers may want to consider changing their overtime policies and correct any overtime payments back to Jan. 1, 2017, which is the date that BOLI has indicated it will start enforcing the new interpretation of the rule.