Nearly one-fifth of small businesses would be affected by overtime rule change

Dive Brief:

An estimated 3.6% of workers employed by small businesses clients — those with one to 49 employees — of payroll service provider Paychex would be newly eligible for overtime pay under the U.S. Department of Labor's recently proposed update to overtime rules under the Fair Labor Standards Act (FLSA), according to Paychex data.
The proposed rule would raise the FLSA's standard salary threshold for executive, professional and administrative white-collar workers from $23,660 a year ($455 a week) to $35,308 a year ($679 a week). Per Paychex's analysis, the five industries with the highest percentage of businesses employing workers who would gain overtime eligibility include educational services (30.2%), accommodation and food services (24.9%), arts, entertainment and recreation (22.4%), wholesale trade (22.4%), and retail trade (22%).
On a national scale, 19.5% of small business Paychex clients would be affected by the new rule, according to the data. Regionally, the South has the highest percentage of both business clients (23.2%) and employees (4.3%) affected.

Dive Insight:

The Labor Dept.'s proposed overtime rule is significantly lower than the $47,476 mark proposed by the Obama administration. That figure would have effectively doubled the number of eligible U.S. workers, and small businesses opposed it heavily before it was later enjoined by a federal judge.

Public comments from the Society for Human Resource Management (SHRM), which stated its support for the Trump administration's update, indicate the $35,308 a year threshold may generate a more positive reaction from the private sector. But even SHRM added a few suggestions for DOL, including that the department reconsider a proposed increase for the highly compensated employee exemption and give employers at least 120 days to implement final rules.

But the issue of implementing the new rules could give some employers pause. Alfred B. Robinson, an Ogletree Deakins' shareholder and former acting administrator of DOL's Wage and Hour Division (WHD), previously told HR Dive he anticipates the proposal's implementation to occur in the latter half of 2019, which he said could be challenged by legal actions. Furthermore, the Obama administration's enjoined rule is technically still in play, according to another ex-acting administrator of WHD, Littler Mendelson shareholder Tammy McCutchen. A delay in DOL's implementation process — which McCutchen called "very squished" — could mean more change in the event that a new administration captures the White House.

Politics aside, experts have advised HR leaders not to wait for the final rule before creating an action plan. Priorities for employers can include auditing the job duties of workers to ensure they're properly classified, as well as deciding how to handle projected pay increases.