Business owners may face challenges as the federal administration moves to double (and then some) the threshold for overtime exemption.
An estimated 5 million workers will soon require overtime pay—that’s 1.5 times their hourly wages—if the Labor Department’s plan to raise its overtime salary threshold comes to fruition in January. For Georgia small business owners wondering if they’ll be able to afford the update, an Atlanta attorney has the sobering answer: “Probably not.”
The proposed ruling would more than double the threshold at which salaried employees in “executive, administrative, and professional” positions are exempt from overtime pay as outlined in the Fair Labor Standards Act (FLSA). Currently capped at $23,660 per year, employees making less than $50,440 would require time-and-a-half wages for every hour worked after the standard 40.
It’s a proposal that could affect as many as 53,000 retail and restaurant workers in Georgia alone, according to the Georgia Retail Association.
“This is a substantial increase by any measure and tough for businesses to swallow,” writes Matthew R. Simpson, an Atlanta attorney who specializes in labor and employment law. “But in the eyes of many of Georgia’s small businesses, the new rules could be crippling – particularly those outside metro Atlanta or engaged in lower-wage industries such as child care, hospitality and public administration.”
Companies that do less than $500,000 in business per year generally aren’t covered by the FLSA. But the new overtime threshold could be devastating for small businesses that barely exceed that amount.
Simpson gives a Georgia-specific example. For a child care center that does $500,000 in business per year and is located in south Georgia, where the median annual salary is $34,620, the company would have to spend more than 10 percent of its budget on a single employee just to avoid overtime requirements.
Workers paid by the hour, as well as those whose duties are not classified as executive, administrative or professional, would still require overtime pay.
“Hopefully, after considering comments from the public at large about its current proposal, the Labor Department will … revise the regulations in a manner that is workable for everyone, including Georgia’s small businesses,” Simpson says.