Ain’t No Cure for the Overtime Blues
But there are treatments available. When the Department of Labor announced in May that it would more than double the minimum salary needed to qualify an employee as exempt from overtime pay on December 1, 2016, you could hear the collective gasp from businesses nationwide. That sound echoed even more loudly in broadcast studios across the country, as the “round the clock/breaking news” nature of running a broadcast station places a high premium on employees that aren’t locked into a 9 to 5 existence. By increasing the minimum salary needed for an employee to qualify as overtime-exempt (from $23,660 annually to $47,476 annually), the rule change may price many broadcast employees out of their jobs.
Few businesses can absorb the sudden added cost of either paying overtime to previously exempt employees, or drastically raising salaries to maintain those employees’ exempt status. As a result, many businesses will respond by simply cutting overtime hours for employees making below the new threshold, and working employees above that threshold harder to make up the difference. In fact, the Department of Labor predicted that response when it adopted the change, noting that its economic analysis “predicts that affected workers who work overtime will, on average, see a modest decline in base pay and a decline in overtime hours, but will see an overall increase in weekly wages, because they will earn time-and-a-half on the overtime hours that they do work.” With employees below the new threshold being upset with what they perceive as a demotion to hourly status, and employees above the new threshold having to work harder than ever, it’s guaranteed that many employees will be unhappy. Managers that are being forced to restructure their employee pay and reexamine their budgets are even unhappier.
When the rule change was announced, Pillsbury’s Employment Practice issued a Client Alert discussing the new rules and suggesting a variety of steps businesses could take to mitigate the impact. We in the Communications Practice followed up with an Advisory specifically addressing the impact on broadcasters, both because of the odd hours of the broadcast business, and the fact that a lot of broadcast employees’ salaries fall between $23,660 and $47,476. Fortunately, their are some exceptions to the overtime requirements that broadcasters can utilize, particularly one adopted in 1961 applying to certain types of broadcast employees working at small market stations. The details on this and other potentially applicable exceptions can be found in the Advisory.
Broadcasters looking for more details and strategies for complying with the rule change while minimizing the economic impact on their stations might also want to check out When Taking Care of Business Requires Working Overtime, a webinar on the subject sponsored by the National Alliance of State Broadcasters Associations back in June. In the webinar, my Pillsbury colleague Rebecca Carr Rizzo and I walked through the new requirements, discussed how they apply to typical categories of broadcast employees, and focused on how to assess and address the impact of the changes on both stations and their employees. Rebecca later participated in a podcast on the subject for Current, the nonprofit news service for those in the public radio and TV industry.
So if you are just hearing about this for the first time, or have been procrastinating in preparing for the December 1 deadline, you have a lot of work to do in a short period of time. Those hoping for a reprieve from Congress should not use that as an excuse to avoid grappling with the changes needed to be in compliance on December 1. In making this change, the Department of Labor was clearly channeling the desires of the White House, which sees the move as one response to a shrinking middle class. As a result, any effort by Congress to override the Department of Labor is likely to encounter a veto from the President. The thinking is that once employees get used to being eligible for overtime, it will be politically impossible for Congress (or a subsequent administration) to return to the lower salary threshold.
Indeed, one of the few governmental developments since the change was announced in May is the introduction of S.3464 in the Senate by Senator Lamar Alexander of Tennessee. Acceding to political reality, even that bill does not seek to block implementation of the new salary threshold, but would instead phase it in, starting at $36,000 on December 1, 2016, followed by three more increases in 2018, 2019, and 2020, at which point it would stay at the $47,476 level that otherwise will go into effect a few weeks from now. The legislation would also offer some relief to nonprofits, colleges and universities, certain health care providers, and state and local governments. For the reasons discussed above, as well as the dwindling number of days between now and December 1, broadcasters should not sit on their hands hoping the problem will be solved by legislation. Even if S.3464 becomes law, businesses would still face a December 1 deadline, just one with a lower salary threshold for overtime exemptions.
Failing to comply with the overtime requirements carries stiff penalties, and many of the most elegantly cost-effective solutions are complex, leading those who wait until the last minute to resort to simpler, less cost-effective solutions. When it comes to addressing overtime, you are nearly out of time.