Too soon to quantify Peninsula impact from major overtime rule shift

Travis Fain
Contact Reportertfain@dailypress.com

Local businesses, governments and nonprofits are digesting a massive federal rewrite of overtime regulations that will make millions more people across the country eligible for time-and-a-half pay when they work more than 40 hours a week.

The new rule doubles the salary threshold beneath which overtime will be required, taking it from $23,660 a year to $47,476. This will be the first threshold change since 2004, and it's slated to go into effect Dec. 1.

"It affects everybody," said Nicole Riley, Virginia director for the National Federation of Independent Business. "A lot of employers are going to be scrambling."

Calls around the Peninsula on Wednesday, less than 24 hours after the new rule was announced, yielded little in the way of certain impact. Newport News Shipbuilding, Hampton Roads' largest industrial employer, predicted little direct effect, because of the salaries it already pays.

But Beci Brenton, public affairs director for parent company Huntington Ingalls, said the company is "very concerned" about the effect on its suppliers.

Riverside Health System, which employs some 10,000 people in southeastern Virginia, said the new rule will affect about 300 employees. How the company responds, spokesman Peter Glagola said, will be hashed out over the next few weeks.

Rule critics have predicted negative repercussions for employees as businesses choose between absorbing overtime costs and restructuring, potentially cutting hours worked to avoid overtime costs. U.S. Department of Labor guidance lays out four strategies for employers: Pay the time-and-a-half, raise salaries above the new threshold, limit worker hours to 40 a week or some combination of the three.

The rule would expand overtime eligibility to 4.2 million workers, boosting wages for workers by $12 billion over the next 10 years, according to statistics provided Wednesday by U.S. Rep. Robert C. "Bobby" Scott's office. Department of Labor estimates, issued before the rule was finalized, indicated that higher wages would effectively transfer more than $1.18 billion a year from employers to workers.

Scott's office said the rule encourages employers to hire more people and give part-timers more hours and ensures that "employers will no longer be able to force low-paid employees to work those extra hours for free."

Scott, D-Newport News, called it "a critical step forward by giving Americans a long overdue raise" after decades of productivity increases accompanied by meager wage increases.

Attempts to reach Hampton Roads' Republican members of Congress on this issue Wednesday were not successful, but U.S. Reps. Rob Wittman, R-Westmoreland, and Randy Forbes, R-Chesapeake, signed on to legislation in March meant to block the rule, which President Barack Obama initially called for in 2014, starting the Department of Labor's review process.

Forbes and Wittman were among more than 150 Republican signators on that bill, which is sitting in committee in the GOP-controlled House of Representatives.

The new rule doesn't change the categories of employees due overtime, but it moves the salary threshold and sets up a threshold recalculation every three years. Teachers, doctors and lawyers, for example, remain exempt from the rule, but it will touch a massive swath of the U.S. economy.

State and local government employees, for example, will be affected. Virginia Department of Human Resource Management Director Sara Wilson said Wednesday that her team is "assessing the impact on the commonwealth now."

"It's too early to call," she said.

Riley, the NFIB director in Virginia, said the rule could hit particularly hard in the retail sector and at restaurants. These businesses often have small profit margins, she said.

The rule robs employers and employees of flexibility, she said, taking away the options of paying bonuses or providing comp time to a new range of workers, Riley said.

"I think it's a little bit of a misnomer to think of these (business) people as abusing workers," Riley said. "Most employers work with their employees."

Fain can be reached by phone at 757-525-1759.

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