Feb 01, 2016 - 7:00pm

A Federal Overtime Rule Could Drive One Nonprofit for At-Risk Youth to Close Its Doors

Senior Editor, Digital Content

The Labor Department may think making more workers eligible for overtime is helpful, but its inflexibility and costs hang like a dark cloud over employers and workers.

The Labor Department proposes those earning salaries less than $50,440 a year be eligible for overtime. This doubles the $23,660 level under current rules.

The proposal is “massive in its sweep, covering all types of employers and employees with very tiny exceptions,” Randel Johnson, the U.S. Chamber’s senior vice president for labor, immigration, and employee benefits, said at a U.S. Chamber event on the rule. “Virtually every kind of employer in this country needs to be concerned about this regulation.”

Small businesses, nonprofits, and their workers are particularly vulnerable.

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Less Flexibility for Small Businesses Workers

FACES DaySpa in Hilton Head, S.C., employs 25 people including massage therapists, nail technicians, and administrative staff. A salaried general manager keeps all the moving pieces smoothly running.

Patricia Owen, president of the day spa, explained that it isn’t a typical 9-5 job:

It’s not a job that’s measured by the hours worked; it’s measured by getting the work done. Sometimes that might mean working at home on a project for an upcoming event, or preparing for the next day’s employee reviews, or even answering the phone to find out that it’s an employee has a sick child and is not going to come into work tomorrow.

The woman in that position loves the job’s flexibility:

She usually puts in 40-45 hours per week, but can set her own schedule. She can come in early, go home late, go home at lunch to walk her dog. As long as she gets her job done, she can do whatever.

The Labor Department’s overtime rule would radically change that, Owen explained:

We’ll put her on hourly, limit her hours to 40 hours a week. Which means some of the work won’t get done. Which means my entire staff could suffer. She will have to make sure she documents every minute worked, whether at work or not.

And I’m sure she’ll feel like it’s a demotion. I’m sure she’ll feel like she doesn’t have this exciting, new career, but that she’s back to having a job.

The overtime rule “could end up hurting the people it’s trying to help,” said Owen.

Another South Carolinian, C. Craig Lambert, who owns Creature Comforts Veterinary Resort and Suites with his veterinarian wife, faces a similar situation with his salaried general manager, Stacy.

Stacy’s husband is a tour bus driver and gone for months at a time. Lambert’s company wanted to make sure she had the flexibility to come and go from office as needed to take care of her two sons.

But the new overtime rule limits the company’s options. Creature Comforts could raise Stacy’s salary above the new, $50,440 threshold, but Lambert said, “We can’t afford to eat this kind of a boost.”

Too many think small businesses are “building pallets of gold blocks,” Lambert declared, but the truth is “we’re just trying to make payroll. We’re trying to pay off our debts.” There isn’t a big pool of money employers can go to, not when companies’ profit margins are in the mid-single digits.

Unfortunately for Stacy, Creature Comforts’ other choice is making her an hourly employee and taking away the work flexibility she has. As an hourly worker, Lambert said:

She can’t leave for the award ceremony on the clock. She can’t leave early for a baseball game or a wrestling match on the clock.

Existential Threat to Nonprofits

While small business owners are pulling out their hair, nonprofits that serve some of the most vulnerable people in our society dread the proposed overtime rule.

Elizabeth Hays, the human resources director for MHY Family Services in Mars, Pa., warned that there is a “real risk that my organization may have to close its doors.”

MHY provides mental health treatment to at-risk youth. In its work, workplace flexibility is critical for delivering services, Hays explained:

Possessing bachelors and master’s degrees, these are professionals that value the autonomy to make crucial and timely decisions. They provide direction during treatment and crisis, and they prefer flexibility over clock-watching and shift work.

These professionals commonly work more than 40-hour work weeks and 10-12 hour days when helping people in crisis.

Youth and families treated by MHY benefit from relationships that grow over months and years and “can’t be replicated by swapping in another professional to avoid exceeding 40-hours on the part of a primary professional,” Hays stressed. “Continuity of care would be undermined.”

Even worse than being “contrary to effective therapy” is the overtime rule’s cost, which will be “three-quarters of a million dollars in unfunded expenses.” Since MHY doesn’t expect funding increases from government and donors, Hays explained, it “would be forced to reduce its client base and unfortunately underserve our county and family stakeholders.”

The final regulation is due out this summer.

Stop the Labor Department’s Overtime Reclassification

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.