Proposed 'overtime rule' changes

Editor's note: This article has been updated to include an interview with the "restore overtime" coalition conducted after press time. 

Though they don’t earn overtime pay as salaried workers, managers and administrators at Life Works have flexible work schedules that make their jobs easier.

If an employee’s child has an after-school event, the employee can leave work early to catch the action. And if a client calls unexpectedly with an illness, the Life Works employees might work a few extra hours to meet with the individual at the hospital.

That flexibility is especially important at Life Works, where employees serve people with intellectual and developmental disabilities on their own, often unpredictable schedules, said Wendy Keegan, director of development.

But Keegan said the Longview nonprofit is worried that flexibility will be lost for nearly 40 salaried positions under a state Department of Labor and Industry proposal that has small businesses and nonprofits across the state worried that they may face dramatically higher payroll costs and have to shrink employment.

L&I is proposing to dramatically raise the minimum pay salaried workers must earn before a business can exempt them from getting overtime pay. That threshold is currently $13,000 in Washington, but employers have to pay the federal level of $23,660. L&I is suggesting raising the state’s threshold to nearly $80,000 by 2026.

The change would affect more than 250,000 white-collar workers, including executives, managers, administrators, salespeople and computer professionals.

If the L&I Director Joel Sacks approves the proposal after a public comment process that closes Sept. 6, it would be the first time the state’s so-called “overtime rule” changed since 1976. His decision is expected late this year.

Business representatives say change is overdue, but L&I is going to far too fast.

“It doesn’t make sense to us in the business world to say, ‘In six years we are going to make up for the inequities of the last 40 years,’ ” said Kelso-Longview Chamber of Commerce President Bill Marcum.

The Washington State Labor Council is backing the proposal as a way for employees to “take back our time” and receive fair compensation for the work they do.

“As working families struggle to pay the bills, they have been working longer and longer hours, sometimes for free because of our outdated overtime pay rules,” Larry Brown, president of the state labor council, said in a prepared statement in June. “This update is badly needed so companies can’t exempt so many workers from the 40-hour workweek. It will mean extra pay for some, but importantly, it will help many people in Washington get their time back, too.”

Jack Sorensen, a spokesman for a "restore overtime" coalition that includes the labor council, said using the 1970s overtime standards leaves "hundreds of thousands" salaried workers overworked and under paid. 

"When employers have gotten away for more than 40 years with overworking and underpaying employees, they've forgotten how overtime protections work. Instead, we've invented words like 'flexibility' or 'upwards mobility' that are meant to make an employee feel better about the fact that they are working hours they aren't getting paid for."

But many small businesses and nonprofits in Cowlitz County are concerned that updating the overtime rule will increase costs and hurt companies.

Keegan declined to share the average salary for Life Works management positions, but she said that most of the salaried employees would be eligible for overtime pay under L&I’s proposal.

Not only would that take away flexibility, as employees are moved to an hourly work schedule that is “heavily scrutinized” to avoid overtime, but also it also would mean paying employees more during those unexpected client “crisis” calls, Keegan said.

In an Aug. 5 letter to local legislators, Life Works Executive Director David Hill wrote that “reclassifying” salaried workers on an hourly schedule would “dramatically increase payroll expenses and possibly lead to cutting employee hours and jobs altogether.”

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Life Works’ “biggest fear is being able to provide the same level of care that people have come to expect — and that they deserve,” Keegan said.

Sorensen of the pro-overtime coalition rejected claims that updating the rule would raise costs for businesses and nonprofits. 

"Nothing about this proposal has to add a single cent to your bottom line. ... Just send your people home at the end of a regular work week," Sorensen said. 

And if an employer has to pay occasional overtime hours — maybe to plan a fundraiser or gala, Sorensen said — that's a relatively minimum cost. Sorensen estimated that a salaried employee making $60,000 would earn $865 in overtime pay if they worked a 60-hour work week under the proposed changes. 

"If you are saying $865 puts you in the red, or that cost overrun is so habitual because you depend on overworking your employees, then you just have a bad business model," Sorensen said. 

Chamber President Marcum said he expects most of Cowlitz County’s salaried workers would be moved to an hourly pay schedule because they won’t make enough to qualify for an overtime exemption.

“This is a small community, so I really can’t imagine a lot of salaried workers making more than $80,000 a year, especially at nonprofits,” Marcum said. According to the state Office of Financial Management, half of Cowlitz County households make less than $46,000 each year. (Figures for average salaries were not available.)

To avoid having to pay overtime to employees, business owners might choose to decrease hours overall, Marcum said. It’s a scenario with no winners, because employees could end up making less, Marcum added.

“I think you’ll find businesses trying to hire two, 30-hour-a-week people instead of worrying about paying 20 hours of overtime (to one worker) … That to me is not a good thing, if a salaried employee who is making $50,000 and is now put in a 30-hour-a-week job making $40,000 or $35,000,” Marcum said.

Sorensen called Marcum's suggestion "a red herring meant to scare workers into allowing themselves to keep working overtime." 

"Businesses are using scare tactics to convince overworked and underpaid workers that reintroducing (overtime) protections will hurt them," Sorensen said. 

However, business owners do recognize a need to update the state’s antiquated overtime rule so salaried employees can be fairly compensated for their work.

Marcum said it’s “absolutely true” that some salaried employees work more than they are fairly paid for, just like the state labor council says. He said that the current level — $23,660 — is “way too low” of a salary for an employee to be considered exempt from overtime.

But a smaller boost to the threshold would be more reasonable for businesses, Marcum said. For example, the federal government is proposing to raise the nationwide threshold to $35,100, up from $23,600. (If state and federal overtime rules differ, businesses in this state must abide by whichever threshold is higher.)

Life Works officials said the proposal has “good intentions,” but is “aggressive” and has “harsh unintended consequences for many businesses.”

“I think (the state) is trying to save people from being overworked, used and abused,” Keegan said. “But I would venture to ask any of our employees that are salaried: Do you feel overworked?”

Keegan said Life Works employees “believe in their work and love what they do.” Plus, the nonprofit offers time off for employees that work an especially long week, she said.

L&I will take public comments on its proposal through Sept. 6. Comments can be submitted by email at EAPrules@Lni.wa.gov or by mail to the Employment Standards Program, P.O. Box 44510, Olympia WA 98504-4510.

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