Recently, the Department of Labor released a new rule that will dramatically increase overtime pay obligations for employers in Lewiston, Auburn and across the country. The DOL’s proposal, which goes into effect Dec. 1, would more than double the current salary threshold of $23,660 per year to $47,476.
On behalf of nearly 1,200 area businesses represented by the Lewiston Auburn Metropolitan Chamber of Commerce, we continue to remain concerned with the impact of this drastic increase.
In just a few weeks, across the state, tens of thousands of workers currently making a salary of less than $47,476 a year, including many executive, professional and administrative employees, will be reclassified as hourly nonexempt employees.
As the rule was being rolled out, Maine businesses, nonprofits and organizations representing them spoke up about concerns with the change, myself included. The Lewiston Auburn Metropolitan Chamber of Commerce represents 114 nonprofits which, by their very nature, have limited budgets with which to provide critical services to our populations in need. The DOL’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 will also impact the ability of Maine’s colleges and universities to maintain the current status quo without raising tuition levels.
What is even more concerning is that, going forward, the threshold would automatically be increased every year (something that has never been done before) based on an unpredictable schedule, with employers given no chance to provide input and a short window to comply with each change.
Finally, the rule is designed as one-size-fits-all and will have a disproportionately negative impact on 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, the reality is a $50,000 per year salary in California is equivalent to a salary of only $30,000 per year in Maine.
We continue to agree that we need a reasonable increase to the salary threshold. However, the implementation of this increase is coming too fast and too furiously for Maine employers.
Thankfully, certain members of Congress have taken notice of these concerns and have introduced legislation that takes a more thoughtful and measured approach. The House has passed a bill, H. 5813, that would delay implementation of the rule by six months from Dec. 1, 2016 to June 1, 2017. It is a step in the right direction.
More recently, the Senate has introduced S. 3464. This bill would phase-in the new salary threshold in four stages through five years, giving employers additional time to prepare for the impact of the full increase after requiring them to make an initial increase by this December. The bill would also prohibit automatic increases to the threshold moving forward. This would ensure that, in the future, it would be the current DOL administration implementing appropriate increases at the appropriate time utilizing the customary process, while ensuring employers had the opportunity for input.
There is a now a clear path forward to fix the flawed overtime rule.
Sen. Angus King has shared many of our concerns and 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 various regional economic differences. Sen. Susan Collins has stepped forward as an original cosponsor of S. 3464.
On behalf of our membership, we feel that Sen. Collins’ fellow members of the Maine delegation should co-sponsor these bills so that we can proceed in a manner that will not be overly burdensome to Maine’s valuable small businesses and those non-profits fighting every day to provide services to those in need.
Matt Leonard is president and CEO of the Lewiston Auburn Metropolitan Chamber of Commerce.
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