Businesses give attention to new regulations on OT, minimum wage
By Mike Costanza
In the past few years, New York has changed the standard for paying overtime, raised the minimum wage and mandated paid leave for qualified employees. While some of the new measures appear to benefit employees, others have forced businesses to make undesirable changes.
Of all the recent changes. those regarding new overtime thresholds and minimum wage levels probably have had the most obvious effects. The New York State Department of Labor, or DOL, has incrementally increased both since 2016.
DOL differentiates between nonexempt and exempt employees.
“A nonexempt employee, or what we commonly call an hourly employee, is . . . paid for all hours of service,” says Steven Modica, principal owner and founder of the Modica Law Firm. “If that person works more than 40 hours in a given week that person is entitled to overtime pay at one-and-a-half times their usual rate for all those hours.”
Exempt employees, on the other hand, are not eligible for OT. Those in managerial positions, for example, are generally not qualified for the additional pay.
One factor that determines whether an employee is nonexempt–and OT-eligible–is the amount that that person is paid.
Until a few years ago, those who were paid $675 a week or less were classified as nonexempt, wherever they worked in the state. Then DOL set out to establish new pay thresholds for that status. The thresholds vary according to the part of the state involved, and in some cases with the size of the business. The threshold for those employed by upstate businesses, $727.50, took effect on Dec. 31, 2016.
Each year since then, the nonexempt thresholds have incrementally risen. This year, those who make $832 a week or less are eligible for OT. That will rise to $937.50 at the end of 2020.
At the same that DOL began boosting nonexempt thresholds, it also started gradually raising the minimum wage. For upstate it rose to $9.70 an hour on Dec. 31,2016, and to $11.10 at the end of last year. At the end of 2020, it will be $12.50.
DOL’s new rules regarding employee pay have touched local firms in different ways.
“The wage affects us not so much. Our hourly employees are paid about on average $16-$17 per hour.” says Ellen Brenner-Boutellier, vice president, CFO and co-owner of local Fleet Feet stores. “The exempt salary requirements, however, those have impacted our employees.”
Fleet Feet, a nationwide franchise, sells running shoes, gear, accessories and apparel. Brenner-Boutellier co-owns three stores–two in the Rochester area and one in Buffalo–that employ an average of 50 people throughout the year, including seasonals. About half of them are hourly, and about one-third of the entire workforce is full-time.
The old OT threshold gave some on Brenner-Boutillier’s payroll a measure of flexibility.
“‘They were able to create their own schedule,” she says. “‘It was more flexible when they came in, when they left, when they took their meal periods.”
The new pay ceilings have forced the business to shift some of its employees to nonexempt status in order to meet its needs. Those who have been shifted to nonexempt have also had to adjust.
“Their flexibility is gone,” Brenner-Boutillier explains. “They have to work by a set schedule, certain clock-in-clock-out rules that we have established.”
The shift might also be hitting employees in another way as well.
“There could be some dollars difference end-of-year,” Brenner-Boutillier says.
The new OT thresholds are of little concern to Wickham Farms president and co-founder Bill Wickham. The 135-acre Penfield farm grows vegetables, pumpkins and apples, and offers a food service, a retail store, corn mazes and mini-golf during its season. About 80 people work there each year, including seasonals, approximately 60 of whom are high school or college students. Wickham and another employee are the only full-timers.
Though the fact that almost all of the farm’s workers are part-timers largely eliminates the possibility of overtime pay, Wickham decries having to pay the 2019 minimum wage of $11.10 an hour to high school students.
“I think that’s a pretty tall lift, to be paying a high school student that kind of rate when they have no work experience,” he says.
Atop that, the higher minimum wage has pressured the business to raise the pay of its older employees.
“I would like to pay my experienced staff who are really good,” he explains. “On the other hand, I have to spend so much of my line-item for payroll on the on the entry level that I have no discretion over that.”
The need to pay higher wages has forced Wickham to cut back the days his business is open to the public. In the past, the farm was open seven days a week from about May 1 to Halloween. This year, it will be open only three days a week until Aug. 10, then shift to the seven-day schedule. He is also looking at ways to reduce his workforce.
“Online ordering, online ticketing for events, anything to eliminate labor. We’re definitely exploring that,” Wickham explains.
Wickham is also looking into the possibility of hiring more older workers, instead of students. He asserts that Albany could have saved him the trouble of considering such changes if it had given him more flexibility as to hourly pay.
“I think there should be some sort of a student or training wage that would allow us some ability to allocate that more fairly,” he explains.
Robert Duffy, president and CEO of the Greater Rochester Chamber of Commerce, says the increases to upstate’s minimum wage have probably impacted small businesses the most. Though he believes the majority of the small businesses in his organization have been against the increases, overall its membership has offered a mixture of views of them.
“We have members who said ‘No, we applaud that. We want to pay our people more,” he says. “I have some that will tell us that “We have to cut positions or we’re not going to be in business.”
While coping with the new rules concerning OT and wages, local firms have also had to adapt to the New York State Paid Family Leave Act. Under the act, which took effect in 2018, employees who have worked 20 hours or more for 26 consecutive weeks are eligible for paid family leave. Those who have put in less than 20 hours a week are eligible after working for 175 days. Those needing to bond with a newborn or an adopted or foster child; care for a close relative who has a serious health condition, or help loved ones when a family member deploys abroad on active duty can qualify for the benefit.
This year, a qualified employee could receive 10 weeks of leave, and be paid 55 percent of his or her average weekly wage each week, up to a cap of $746.41. The amount of leave for which an employee is eligible, and the pay the employee receives, annually increases.
Employee payroll deductions cover the costs of the leaves, but that doesn’t mean the Paid Family Leave Act does not pose issues for employers. Several on Fleet Feet’s payroll have already made use of the benefit, though none of them have been out long-term.
“From our side, the only challenge is scheduling. If there’s an illness or something of that nature, oftentimes that’s not scheduled out,” Brenner-Boutillier says. “The main difficulty is we don’t know when the person’s coming back.”
Potential scheduling proems might be a concern for other local businesses, as well.
“A small business has a more difficult time filling a position than a large business,” Duffy says.
Though his members have not argued with the intent of the Paid Family Leave Act, some have suggested that they be given some form of remuneration for the costs of temporarily filling the positions of employees on leave.
Finally, Duffy calls into question the process by which the rules concerning pay and overtime and the family leave law were developed.
“I do agree on some mandates, and some of the regulatory issues are important–you need a baseline–but I think when these decisions are put forth, there has to be a much greater strategy to sit down with all sides, and to really listen to the impacts,” he says.