The Lewiston Auburn Metropolitan Chamber of Commerce represents more than 1,200 area businesses. As the largest of its kind in Maine, our chamber is proud of the work we do to harness the energy, momentum and enormous potential in Greater Lewiston-Auburn, and we work tirelessly alongside our membership every day to make this area a desirable place to live, work and play.
As part of this partnership, we strive to inform our membership about regulatory changes that will affect them. It has come to our attention that the Department of Labor soon will release a new overtime plan that will dramatically increase overtime pay obligations for the employers we serve.
Under federal law, salaried workers who earn more than $23,660 per year become exempt from receiving overtime pay. The Department of Labor’s proposed overtime plan would more than double that threshold salary to $50,400, though recent reporting indicates the Department of Labor “compromised” at $47,000, which is still double the current threshold.
In all, the proposed rule will affect approximately 20,000 Maine workers.
While it may seem complicated, here is what it boils down to: Most employees (there are very few exceptions) making a salary of less than $50,440 a year, including many executive, professional and administrative employees, will be reclassified as hourly, nonexempt employees. Maine employers likely will have only 60 days to comply and begin tracking, and compensating, these hours in a way they wouldn’t for salaried employees.
In addition, the threshold automatically would be increased every year going forward (something that has never been done before) based on an unpredictable schedule, with employers given only 60 days notice to figure out how they can comply with each change.
While businesses in the Lewiston-Auburn area work hard to provide competitive pay, just because an employee is eligible for overtime pay does not necessarily mean the employee will earn overtime pay. Should employers choose to allow extra hours, they first will need to find this money elsewhere in their budget in the middle of an existing budget cycle.
The LA Metro Chamber of Commerce represents 116 nonprofits that, by their very nature, have limited budgets with which to provide critical services to our populations in need. The Department of Labor’s new overtime rules will so drastically change their current compensation obligations that those services will be reduced and organizational funding will decline as resources are spent on overhead instead of programs. Businesses can choose to raise prices to compensate for higher overhead costs (although they often lose sales when they do) but nonprofits have to absorb the loss. Similarly, the rule also will affect the ability of Maine’s colleges and universities to maintain the status quo without raising tuition levels.
Hourly pay and nonexempt status is not appropriate for all jobs. These reclassified employees will face increased restrictions on the hours they can work, which will limit opportunities and eliminate flexible schedules that attract people to these jobs and enable our nonprofits to provide certain services.
Finally, the rule is designed as one-size-fits-all and will disproportionately harm rural states with lower costs of living, including Maine. While this high salary threshold may be appropriate for areas with a particularly high cost of living, such as California, a $50,000-per-year salary there is comparable to only $30,000 per year in Maine.
Sen. Angus King recently sent a letter to the Office of Management and Budget outlining many of these concerns, stating that the rule would raise the threshold “too much, too quickly” and does not take into account regional economic differences. There is now legislation, the Protecting Workplace Advancement and Opportunity Act, that would require the Department of Labor to perform a detailed impact analysis before implementing changes to the exemptions. The bill requires the Department of Labor to address many of the concerns outlined in King’s letter, including that the department’s analysis of the rule did not consider the impact the proposal would have on regions of the country with different costs of living.
We can all agree that a reasonable increase to the salary threshold should be considered, and the bill does not prevent an increase in the salary threshold; it merely requires the Labor Department to more closely examine the impact of possible changes before proceeding with a final rule.
This rule is coming too fast and too furiously. On behalf of our membership, we feel that Maine’s delegation should co-sponsor the Protecting Workplace Advancement and Opportunity Act so that we can proceed in a manner that will not be overly burdensome to Maine’s valuable small businesses and those nonprofits fighting every day to provide services to those in need.
Matt Leonard is president and CEO of the Lewiston Auburn Metropolitan Chamber of Commerce.