How New Overtime Rules Will Affect Small Businesses

A proposed amendment to the 77-year-old Fair Labor Standards Act might have a major impact on how you do business. Learn exactly what the legislative change is designed to do and the different ways small business owners can cope with the altered landscape.

 

The current labor law

 

In 1938, the Fair Labor Standards Act was put into law. Among its provisions, the law established a national minimum wage, prohibited oppressive child labor and guaranteed workers in most professions overtime pay. Under the law, overtime pay was defined as one and a half times an employee’s hourly wage for all time worked past the standard 40 hour work week. Certain employees were exempted from the FLSA, including those in the legal, academic and medical fields, as well as salaried employees paid at least $23,660 who hold executive or administrative positions within a company.

 

The proposed changes

 

In July, the U.S. Department of Labor announced that it intended to amend the law so that people working in low-paying supervisory roles (e.g., an assistant manager working in a fast food restaurant, a shift leader at a department store) would be entitled to overtime pay. Under the updated law, supervisors would need to be paid overtime or granted salaries of at least $50,440 a year starting in 2016. Proponents of the FLSA amendment argue that the current law does not adequately protect hourly employees because the salary threshold is so low. A full description of the proposed changes to the FLSA can be found here.

 

Options for small business owners

 

If these proposed changes to the FLSA come to pass, and by all indications they will, small business owners should not panic. A number of options are available that will allow you to be compliant with the law while still maintaining your company’s profitability. As this ERE Media piece points out, owners who don’t schedule their managers to work more than 35 hours per week would not be looking at additional costs if the change goes through. Companies that do not offer full-time positions would also be exempt from the FLSA changes. Additionally, entrepreneurs could adopt the business model of billion dollar companies like Uber, for example, and maintain a workforce composed almost entirely of independent contractors. Not only would these workers be exempted from the FLSA, they also wouldn’t be entitled to employee benefits. To get the best possible outcome, small business owners should meet with their investors and a qualified labor attorney to decide the best way forward.

 

This article was written by Mario McKellop of Examiner.com for CBS Small Business Pulse.

 

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