How to Comply and Mitigate the Effects of the Overtime Rule

Despite 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.

Article reprinted with permission from NAHB

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