A new rule revising which salaried employees are paid for clocking extra hours will go into effect soon, impacting about 3,800 Clark County employees and their bosses, according to the Washington Employment Security Department.
The U.S. Department of Labor decided in May to change the so-called “white collar exemption,” an earnings threshold under which employers must pay an employee overtime wages. The ruling makes salaried employees who earn up to $47,476 eligible for overtime pay. Previously, employees who earned more than $23,600 were exempted.
The ruling goes into effect Dec. 1. It will apply to an estimated 4.2 million workers nationwide and 76,000 workers in Washington state.
Scott Bailey, a regional economist with the state agency, said he expects employers will make the change without making waves.
“The new overtime rule by the Department of Labor, in my opinion, will not have a large impact on employment in Clark County,” Bailey wrote in an email Wednesday afternoon. “There may be some wage effects and some creative responses by employers, but I doubt it will result in changes that will be noticeable in our employment statistics.”
In the meantime, the new rule may require some accounting gymnastics of affected employers. They will have to calculate whether a salaried employee making less than $47,476 is worth paying up to that threshold or if it’s worth paying them time-and-a-half when they log more than 40 hours per week. Some businesses might reshuffle responsibilities to other employees in order to shave hours.
“They’re definitely going to want to do the math and look at it both ways: project how much overtime (an employee) would work and what that would cost, versus raising their salary to the new level,” said Rhonda Stephens, a partner at the local offices of Barrett Business Services Inc., a company that consults on human resources and payroll for numerous companies.
According to Stephens, the retail, hospitality and restaurant industries are particularly vulnerable to complications with the new rule. Employers may cut some benefits to offset wage raises, she said; and that increasing pay to relieve overtime pay opens the door for “inequities.”
“They have to look at the bigger picture,” she said.
The department said it made the update to reflect gains in wages since overtime standards were set in 1975 at $23,600. That annual threshold is well below the median income for both men and women in the United States, according to the latest income data from the U.S. Census Bureau.
The new $47,476 per year standard is based on the 40th percentile for earnings in the lowest-wage Census region, which is currently the South.
Bailey said he expected to see local workers receive a pay bump with the ruling, though not a big enough impact to affect employment on a large scale. The average annual wage in Clark County, covering all industries, is $46,693 or $898 per week, but that figure accounts for all jobs, not just full-time salaried workers that this ruling affects.
“Many industries employ large, part-time and seasonal workforces, which would not be covered by the ruling,” Bailey wrote. “Indeed, there is a great deal of variation captured in this estimate. Knowing what the average compensation is helps us with one piece. But what about the variation within that estimate?”
Not everyone was happy with the ruling. Two lawsuits filed in September, one on behalf of 21 states and the other from the U.S. Chamber of Commerce and 50 business groups, argued the decision was an overreach by the federal government.
“This rule, pushed by distant bureaucrats in D.C., tramples on state and local government budgets, forcing states to shift money from other important programs to balance their budgets, including programs intended to protect the very families that purportedly benefit from such federal overreach,” Nevada Attorney General Adam Lexalt said at the time.
Neither Washington nor Oregon are party to the states-led lawsuit.
