How to Comply and Mitigate the Effects of the Overtime Rule

Filed in Codes and Standards, Labor, Legal by on June 7, 2016 10 Comments

12 hours clockDespite strong opposition by NAHB and other leaders in the nation’s small business community, the Department of Labor (DOL) last month issued its final overtime rule, which will more than double the current overtime salary limit of $23,660 to $47,476.

Set to take effect on Dec. 1, the rule will have significant ramifications for many employers, including home building firms and non-profit organizations such as local and state HBAs.

NAHB has prepared an FAQ to help our members better understand and to comply with the rule. In addition, a webinar replay is now available to help you:

  • Learn what employers need to know before Dec. 1.
  • Find out which staff will be due overtime.
  • Assist NAHB’s advocacy efforts on this issue.

Rule Meant to Help Workers Could Harm Them

Most small businesses, including the vast majority of home building companies, operate under tight margins. The huge spike in the overtime threshold could force many employers to convert salaried employees to hourly workers in order to remain solvent. Many employers will be forced to scale back on pay and benefits, as well as cut workers’ hours, in order to avoid overtime requirements and remain in business.

Though the rule is intended to help workers, many could wind up earning less money than they were making previously, and lose the workplace flexibility that comes with being a salaried employee. The rule will also reduce job-advancement opportunities and the hours of full-time construction supervisors, leading to construction delays, increased costs and less affordable housing options for consumers.

Under the new standard, the salary threshold will be indexed to inflation and adjusted every three years, forcing employers to go through this process on an ongoing basis.

NAHB continues to lead the effort to urge Congress to quickly pass the Protecting Workplace Advancement and Opportunity Act (House bill H.R. 4773 and Senate bill S. 2707). The legislation would force the Department of Labor to withdraw this rule until it has considered the effects it would have on small businesses, consumers, workers and the economy.

A Bad Rule that Could have been Worse

The Department of Labor originally proposed to raise the annual salary level to $50,440 to determine if an employee can be exempt from overtime eligibility. NAHB lobbied intensely to get this level reduced and delayed, and in the end achieved a number of improvements in the final rule, including a relatively modest lower threshold of $47,476.

Crunching the numbers, NAHB economists estimate that raising the overtime salary threshold to $50,440 would allow more than 116,000 construction supervisors to become overtime-eligible under this rule. The final threshold of $47,476 impacts 97,213 supervisors.

The difference is significant. In a survey conducted by NAHB last summer, 27% of affected builders said they would respond to the change in the overtime threshold by raising the supervisor’s salary to the new threshold. Thus, an estimated 27% of the 97,213 supervisors would have their salaries raised to $47,476 instead of $50,440. This is a savings of $2,964 per worker, or $77.8 million in labor costs in 2017 because the rule does not take effect until Dec. 1.

For more information, contact NAHB’s Suzanne Beall at 800-368-5242 x8407.

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  1. Ryan Hukill says:

    More rules and regulations lead to higher costs, higher prices, less jobs, less growth, more unemployed, more rules and regulations to help us again.

    If someone doesn’t like how much or how they are getting paid than it is their choice to stay or leave, but thank you for helping us all run our companies better and create more jobs.

  2. Jim says:

    In all areas of residential construction that we operate in, we have a large portion of the population that are retired tradesmen from northern areas. These folks are constantly asking for part time jobs, but we have resisted hiring them in order to help our existing salaried construction managers maintain a good salary.

    These new rules will actually help us cut our field management cost, since we can not hire retired folks by the hour, keep them under 20 hours a week, and forget overtime, benefits, and company trucks. We will assign a retiree to a couple of homes each, and they will in all probability do a more detailed job that our existing construction managers are able to do when they get overloaded.

    So for us this may be a good thing.

  3. John says:

    This ruling is just another example of the government hurting the people instead of helping them. In the cold snowy climates where we have a small window of good weather to get our work done they are going to hurt a lot of people who are paid on an annual basis vs an hourly basis so that they can have stability and a leveled out income during those months where we can’t work construction and landscaping.
    The old adage “you have to make hay when the sun shines” really means something to many people. I grew up in farming and construction and learned at a very early age that it is true. You have to work when you can and make the best of it. Longer days in the summer and shorter or no days in the winter. Mother Nature does not keep a time clock nor cares about about the politicians agendas that are so detached from the real world.
    Elevating the salary threshold will now make it all to easy for employers and employees to resort to unemployment during the winter months. Not only is un-employement de-moralizing for the employee it will cost the employers and the public more to provide a stable income to these workers. Furthermore it may drive some trades people out of these industries to work more stable environments that are not climate dependent in order to care for their families.
    At least the government can now employe more people as un-employemt reps to handle this situation. I guess it can be considered a win for the government!

  4. Chuck says:

    I am an owner of a small glass company. I have also been a salaried employee. I am actually in favor of this bill. When I was an employee I was paid an hourly rate until it was determined by the owner that because of overtime I was making too much money. Too many owners use paying a salary as an excuse to overload an employee with excessive work. My hours increased by almost 20%. The give and take that is assumed of a salaried employee is typically a one-way street. Any days that I was sick or had a sick child was countered with working a Saturday to make up for lost time. It was never implied that it was the reason, but it was funny how I always worked Saturdays on weeks that it occurred.

  5. Scott says:

    While I am very pro business and view any type of government regulation as intrusive and counterproductive that ultimately hurts the consumer, I have a different take on this legislation. We do not have a single salaried employee in our company of 30 people that make less than $50,000 per year. I would submit that those affected by this regulation are grossly underpaying their employees and/or using salary to avoid paying overtime, many of which likely do not meet the rules governing salaried position to begin with. BTW we are a custom home builder.

    • EA Stell says:

      You grossly misunderstand how many others in the industry pay employees. I’m a material supplier and we pay roughly a third of compensation out on commission. This rule completely neglects commission and acts like it isn’t even compensation, which is ridiculous. Productivity is a major goal and should be striven for because in the end that’s what makes everyone better off; pay based on results is a really good way to push productivity. And BTW, we are in an area where making $50,000 a year is a solid living, semi-rural WI.

  6. sheila says:

    It will also make employers look more closely at the productivity of their employees. An employee that may be good but a little slower on salary didn’t matter so much. But now going to a possible overtime situation will be a big deal.

  7. M. says:

    Since when does the government care? about the working blue collard class. How many people do any of you know? That can retired from construction, other then owner’s and or upper management. With all this said, now it makes sense for everyone to be an employee, do any of you remember what happend to the big car manufacture’s? Now you need at least 45k to buy a decent truck, my point is, the cheapest house is going to be starting at 350k! If this gets’ enforced!!! Salary plus bonuses is the way to go… Now all they did is, show up to the work place stay as long as you want and get paid..
    Can any of you imagine asking a big national Builder for a $2.00 sq. Ft. increase accros the board???
    Just saying..

  8. DH says:

    Most of our salaried people are over 50K already. We do have some assistants that make 40-45K and are required to work 45 hours. However they have flexibility of schedule, they will lose that now. We just are going to make anyone that makes less than the new threshold hourly now. So if someone is currently on a salary of 45K they will now get paid $18.22 per hour for 40 hours and $27.33 for 5 hours of overtime = same salary as before. Only issue is if they don’t work they do not get paid. We always let salary folks miss days if they had to for sickness and such and they got a full salary as long as we did not feel they were working the system. Now that will not be the case. You can do this type of pay arrangement with almost any former salaried amount as long as it does not dip below the minimum wage. Minimum wage that’s another story. I am sure the government will screw that up too.

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