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Rule could make 140,000 LI salaried workers eligible for OT

Auntie Anne's franchise owner Raj Whadwa in April

Auntie Anne's franchise owner Raj Whadwa in April 1, 2016 at his Tanger Outlet store in Deer Park. Credit: Newsday / J. Conrad Williams Jr.

New overtime rules the Obama administration issued Wednesday could make about 140,000 salaried workers on Long Island newly eligible for overtime pay, said the Fiscal Policy Institute, an Albany-based research group.

Employee advocates cheered the move, and company owners said it could force them to cut back employee hours and increase prices to cope with rising labor costs.

The rules, which take effect on Dec. 1, mean that managers who earn $913 a week, or $47,476 a year, are exempt from overtime pay. For New York managers, that’s an increase of about 35 percent above the current state minimum for being exempt from overtime — $675 a week, or $35,100 a year.

Managers who earn less than that new threshold will have to be paid 1.5 times their regular hourly rate when they work more than 40 hours in a week.

Nationally, the new threshold will more than double the minimum salary for overtime-exempt managers from the current $23,660, or $455 a week. More than 4 million U.S. workers could become eligible for overtime, the administration estimates.

Though the White House projects the rule change will raise pay nationally by $1.2 billion a year over the next decade, local economists said it was too soon to gauge the impact here.

But James Parrot, the Manhattan-based deputy director and chief economist of the Fiscal Policy Institute in Albany, said the higher threshold means more workers will get paid for the extra hours they work, see a bump in pay to the new minimum, or work less without any reduction in pay, and that’s a win for them.

“All of those things mean the economy functions better, and working families will be better off,” he said.

John A. Rizzo, chief economist for the Long Island Association said the impact on wages could be mixed. Those managers who are closer to the new threshold might get a raise, while those far below it might not get any overtime.

Commack resident Raj Whadwa, who owns 10 Auntie Anne’s, Carvel and Cinnabon franchise locations in New York and Connecticut, said he might consider hiring two managers instead of one, and they would work no more than 40 hours a week. He has roughly 150 employees, and about 15 of them are managers, he said.

“It would definitely hurt me,” Whadwa said. “The payroll keeps going up and up; so we are going to have to raise our prices.”

The fast food, hospitality and lodging industries will be the most affected by the new overtime rule, said Ed Teixeira, chief operating officer for research firm, who lives in Stony Brook. He estimates that about 15 to 25 percent of franchisees will be affected, particularly those with several locations.

“They have to become more efficient about scheduling employees,” Teixeira said.

To offset the anticipated cost of paying higher salaries or overtime costs, retailers will make some current salaried workers become hourly employees, and hire more part-time workers, said Marshal Cohen, retail analyst with The NPD Group, a Port Washington-based market research company. Similar changes were made when Obamacare was enacted, Cohen said.

The new overtime regulation rule “means more part-time workers, people working less days and less hours,” he said.

Phil Andrews, president of the Long Island African American Chamber of Commerce, said small business owners may even look to use a temporary work force.

“We would rather keep some people working than have none working at all,” Andrews said.

But John Durso, president of Mineola-based Local 338 of the United Food & Commercial Workers International Union, said the new rule was sorely needed.

“Many workers in a variety of sectors are expected to work over 40 hours per week and do not get compensated for the extra time,” he said.

The higher wage will raise business owners’ costs for such things as workers’ compensation premiums and unemployment-benefits taxes, which are based on wages, said Yvette Hector, vice president of operations at Freeport-based Advantage Payroll Services, which has 3,000 small and midsized clients.

“It is another law that squeezes small businesses owners and forces rising costs of goods and services at a time when disposable income is flat at best,” she said.

But she cautioned businesses about rushing to cut employees’ hours.

“It will affect the employee morale,” she said. “They may feel demoted.”

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