ABC: Overtime Pay Hike Will Harm Small Biz

WASHINGTON – Business associations like the Associated Builders and Contractors remain opposed to the Department of Labor’s final rule that will change overtime regulations under the Fair Labor Standards Act.

On July 1, the final rule ensures salaried workers making less than $58,656 receive fair pay for long hours.

It increases the minimum annual salary level threshold for exemption in two phases: from the current level of $35,568 to $43,888 on July 1, 2024, and to $58,656 on Jan. 1, 2025. In addition, salary thresholds will update every three years starting on July 1, 2027.

“ABC appreciates that the DOL recognized the value in retaining the methodology used by the prior administration in the 2019 overtime rule update for the phase I increase,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Regrettably, the DOL decided to use a new methodology for phase II, which results in a 65 percent increase to $58,656 from the current threshold only nine months from now—further complicating the current economic outlook.” 

He said multiple industries, like construction, are grappling with uncertain economic conditions such as inflation, supply chain disruptions, high materials prices and workforce shortages, all of which push operational costs ever higher.

ISSA, too, opposed the DOL proposed rule because the tight labor market, demand and market changes increasing the cost of labor are already straining the industry.

In its public comments on the rules, ISSA asserted that the proposal would:

• Result in positions not being filled and cleaning services not being able to meet the demands of facilities.

• Result in significant financial harm to businesses due to having to turn down business.

• Result in loss of employee benefits and flexibility.

• 86% of our surveyed members said this rule would drive the cost of cleaning products and services higher. This makes keeping facilities healthy and clean more expensive and would likely cause a reduction in proper and trained cleaning of facilities because some facilities may opt to use lesser or untrained workers to clean facilities to lower their operating costs.

• 62% of our members said this proposal will reduce opportunities for professional development.

Key provisions of the final rule include the following:

• Expanding overtime protections to lower-paid salaried workers.

• Giving more workers pay or valuable time back with their family: By better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the final rule ensures that those employees who are not exempt receive time-and-a-half pay when working more than 40 hours in a week or gain more time with their families.

• Providing regular updates to ensure predictability. The rule establishes regular updates to the salary thresholds every three years to reflect changes in earnings. This protects future erosion of overtime protections so that they do not become less effective over time.

“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” said Acting Secretary Julie Su. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable.”

The department conducted extensive engagement with employers, workers, unions and other stakeholders before issuing its proposed rule in September 2023, and considered more than 33,000 comments in developing its final rule. The updated rule defines and delimits who is a bona fide executive, administrative and professional employee exempt from the Fair Labor Standards Act’s overtime protections.

Wage and Hour Administrator Jessica Looman said, “This rule establishes clear, predictable guidance for employers on how to pay employees for overtime hours and provides more economic security to the millions of people working long hours without overtime pay.”

The Associated Builders and Contractors estimate that the construction industry must hire more than half a million additional workers in 2024 to meet demand.

“Virtually all of ABC’s members employ workers who qualify for exempt status, and phase II of the final rule will reclassify huge numbers of these employees as nonexempt,” said Brubeck. “This will disrupt the entire construction industry, specifically harming small businesses, as the rule will greatly restrict employee workplace flexibility in setting schedules and hours, hurting career advancement opportunities.”

These issues will recur repeatedly because the DOL rule will automatically increase the salary level every three years beginning in 2027. Additionally, the rule’s significant increase in the salary level threshold fails to account for disparate income levels in different regions of the country, said Burbeck.

“ABC will consider all options, including a legal challenge, against this final rule.”