New overtime regulations set to go into effect Dec. 1 will mean some salaried workers could see a bump in pay, but many here will see their salaries converted to hourly wages, say Journal sources familiar with the update to the federal Fair Labor Standards Act.

The rule will raise the salary threshold to $47,476 annually, or $913 weekly, for workers to be exempt from overtime pay—more than twice the current minimum of $23,660 annually, or $455 weekly.

The U.S. Department of Labor claims the new rule will put more money in the pockets of 4.2 million employees, including 76,000 employees in Washington state, or give them more time away from work.

Nicole Tedrow, chief legal counsel for Spokane-based employer-consulting nonprofit Associated Industries of the Inland Northwest, says, “It’s definitely going to make a lot of changes for Spokane-area businesses.”

Tedrow says the rule will have less of an impact in areas with higher wage scales.

“A salary of $47,000 is a lot more in Spokane than it is in Seattle,” she says. “Some employers are going to have to make exempt people nonexempt or pay them more.”

Tedrow says she’s hearing some employers are going to convert people to hourly pay, because their positions don’t warrant pay at the new minimum salary level.

Those employees, however, will be entitled to no less than 1.5 times their base hourly pay for every hour worked beyond 40 house in a week.

Employers aren’t finding it easy to budget for overtime under the new rule.

“In some cases, they’re not sure how much overtime is being worked,” Tedrow says.

Employers don’t want their workers to make less money under the new rule than they’re currently paid, she says, but that could happen in cases where an employer has to hire more people to reduce overtime hours.

“If they have to hire two people to do a job being done by one, the employees are going to make less money,” she says.

In the switch to nonexempt employees, some will lose discretion and flexibility they currently have.

“It could be more negative than positive for quite a few workers,” Tedrow says. “I think there’s going to be morale issues.”

On the other hand, if some businesses bump their employees up to $47,000, it could change their respective labor markets.

“If your competitors are paying $47,000, you’re probably going to see people leave for more money,” Tedrow says.

She says the new rule will require more work on the accounting side if employers choose to pay overtime rather than increase workers’ salary level.

Employers also are struggling with internal equity, she adds.

“Employers don’t want it to have a negative impact on employees. They are trying to find a creative solution to balance the budget, keep the lights on, and keep the employees who work for them,” she says.

Some employees might loosen up on their own overtime rule.

“Usually, overtime has to be approved in advance,” Tedrow says. “Some employers are looking at giving a certain amount of freedom to work a few hours of overtime without approval, so employees don’t feel like they’re being micromanaged.”

Some employers are considering bumping up salaries at the cost of other employee amenities, she says.

“Employers with rich benefits might scale them back and put (the difference) into salaries,” she says. “Younger workers will like that. More seasoned workers might not appreciate it as much.”

Agricultural workers, teachers, doctors, lawyers, some computer-field employees, and outside sales personnel aren’t covered by the overtime rule, she says.

Tedrow says the rule likely will affect the retail industry and nonprofits more than other industries.

“I think it’s going to hit nonprofits really hard,” she says. “They’re on a slim margin to begin with. A lot don’t pay that kind of wage, and those people work a lot of events.”

Sima Thorpe, executive director of The Arc of Spokane, a Spokane-based nonprofit that advocates for people with intellectual and developmental disabilities, says 16 management-level, salaried positions there will be shifted to nonexempt positions.

Those employees will lose some flexibility as they go to hourly schedules, Thorpe says, “And there’s no way around paying overtime.”

After budgeting in overtime, Thorpe figures the new rule will increase the organization’s annual expenses by $50,000 to $75,000.

She says The Arc, which has a $9.5 million annual budget, operates on “razor thin” margins. 

“I came very close to not being able to give merit increases this year,” she says. “To find tens of thousands of dollars is going to be challenging to us. I’m not sure we’ll be able to make it up.”

She says The Arc might have to shelve some new initiatives currently on the drawing boards.

“I understand this is about fairness to employees,” she says. “Fairness meets in the middle with affordability. Now, those two are in conflict.”

On the positive side, Thorpe says, employees who manage time effectively likely will have more time with their families.

“As we get more adept at managing time, we’ll be able to put this behind us,” she says.

Sheila Creel, a Seattle-based spokeswoman for the U.S. Department of Labor Wage and Hour Division, says the purpose of the new rule is to ensure overtime regulations keep up with their original intent.

The overtime-exemption threshold hasn’t been adjusted since 2004, Creel says, noting that the current threshold is below the federal poverty level for a family of four.

“The new rule is more about updating the law,” she says.

The rule also requires an automatic adjustment of the threshold every three years to keep up with inflation. The 2020 threshold is projected to rise to $51,200, although it would be subject to economic conditions.

Even employees whose pay exceeds the salary threshold must have some managerial duties to be exempted from receiving overtime pay, Creel says. Such duties might include executive authority, primary judgement in matters of significance, or professional services requiring advanced knowledge or creative talents. 

The standard-of-duties test doesn’t apply to workers whose annual income exceeds $134,000, she says.

Creel says the department wants to make sure employers are aware of the salary level and who is exempt from overtime protections. She encourages employers here with questions about the rule to call the Department of Labor’s Seattle office directly at 206.398.8039.

“They can even run scenarios by us anonymously,” Creel says. “Enforcement will walk people through scenarios and will be happy to help.”

Creel says she’s also heard concerns that some employees will lose discretion and flexibility in performing their jobs. She adds, however, that employees who don’t meet the minimum salary threshold won’t be able to waive their rights regarding overtime.

“That’s a tough pill for some workers, especially if they have something set up especially for them,” she says. “But that’s the rule.”

The rule has a number of detractors around the country.

The U.S. House has voted to delay the rule until after the presidential election, although President Obama has vowed to veto any legislation delaying the rule.

The Western states of Nevada and Utah are among 21 states that have joined in a lawsuit filed in September that seeks to block the rule. The suit claims in part that the rule overreaches federal authority by including workers in state government administrative operations.

Associated Builders & Contractors, a national trade association, is among a coalition of business groups that also has filed a federal lawsuit seeking to block the rule.

Suzanne Schmidt, executive director of ABC’s Spokane-based Inland Pacific Chapter, says the new rule will affect some project estimators, managers, and superintendents who currently work on salary.

“An estimator, for example, could easily put in a 12-hour day on a bid day,” she says.

William Symmes, chairman of the labor and employment group at Spokane law firm Witherspoon Kelley, says part of the concern about the new rule here is that salaried employees might object to the conversion to hourly employees.

“Part of what employers are facing is they can’t afford to give a raise to $47,000,” Symmes says. “The concern is that people are going to take offense and leave, even though the change is required by law.”

Symmes says a hypothetical current annual salary of $38,000 would convert to $18 an hour if the employee works no overtime.

In that scenario, employers who budget for overtime likely would set the base wage somewhere below $18 an hour.

“There could be a lot of traditionally white-collar jobs that become blue-collar jobs,” Symmes says. “Some employees will take offense to that.”