New federal overtime regulations will make more than 4 million U.S. workers eligible for overtime pay, but the rules aren’t expected to result in widespread raises for “managers” in Louisiana.
“A lot of people are going to look at different ways to skin the cat,” said Thomas R. Peak, a partner with Taylor, Porter, Brooks & Phillips LLP. “I don’t think what is going to happen will be automatically anybody that’s making $24,000 a year and is exempt that their employers are going to give them a raise up to the new level.”
Most Louisiana employers will try to keep their employment costs stable, with solutions that include reclassifying management jobs to hourly positions and capping workers’ hours, Peak said.
Under the new rules, which kick in Dec. 1, employees who make less than $47,476 per year must be paid overtime for work beyond 40 hours per week, according to the U.S. Department of Labor. The old limit was $23,660. That meant lots of fast-food, retail and hotel managers put in long hours exceeding 40 hours per week for pay that wasn’t much higher than that of the workers they supervised.
Federal officials have estimated the regulations could raise pay by $1.2 billion over the next decade. The idea is to help middle- and lower-income workers, whose pay has remained roughly the same for the past 20 years. It’s unclear whether the rules can accomplish that.
The National Restaurant Association and the American Hotel & Lodging Association issued statements saying the increase in the overtime salary threshold could harm business, forcing cuts in jobs and employees’ hours. Both groups, and a number of other business associations, are lobbying Congress to block the rule.
David Teich, president of the Greater New Orleans Hotel & Lodging Association, said it’s too early to say how the rules will affect the industry.
In the old days, many workers at many businesses were salaried, but the guidelines are now much stricter and better defined, as they should be, he said. In the hotel industry, a manager is basically defined as someone who influences hiring and firing and has people reporting to him or her.
“It’s a big issue for business overall, but it’s not like we have people making $20,000 a year in management, salaried positions,” said Teich, who is also general manager of the Windsor Court Hotel.
The hospitality industry employs 85,000 people in New Orleans, he said. The industry offers lots of opportunities to move up through the ranks — Teich started as a busboy — and to make a good living for themselves and their families, he said.
“I don’t know how much more impact this will have. It does put some constraints on our business, but we’ll go with the flow and do what we have to do,” Teich said.
Jeremy Langlois, president of the Greater Baton Rouge chapter of the Louisiana Restaurant Association, said the industry as a whole operates on thin margins; 6 percent is considered very good.
So restaurants have to control costs to stay in business, and most already restrict the hours employees work, Langlois said.
The overtime threshold was last updated in 2004 and now covers just 7 percent of full-time, salaried workers, according to President Barack Obama’s administration. In 1975, the overtime threshold covered 62 percent of salaried workers. The new rules will lift that ratio to 35 percent.
Brian R. Carnie, a partner in Kean Miller LLP, said the rules will have a big impact on the hospitality and restaurant industries, as well as nonprofits.
The firm has lots of nonprofit clients who have salaried workers at well below the new threshold. Most of the clients probably will convert workers to hourly wages.
“They will continue to receive essentially the same money that they’re getting today,” Carnie said. It’s just instead of being considered a salaried employee … they’re going to have to punch a clock or take some other action to make sure they track all of their time.”