Local employers and law firms are beginning to wrestle with the impact of a labor law change that will require overtime pay for thousands of salaried Maine workers.

The new overtime rules, which the Obama administration announced Wednesday, will go into effect Dec. 1. Under the rules, salaried workers must get overtime pay – time-and-a-half after 40 hours – if they earn up to $47,476 a year, double the previous threshold of $23,660. People making more than $47,476 annually, along with managers, professionals and administrators, will not have to be paid overtime.

The change will affect an estimated 16,000 workers in Maine, according to the U.S. Department of Labor. That’s about 3 percent of the state’s workforce, and represents only the second increase in the overtime salary ceiling since the 1970s.

At the University of Maine System, the change will affect about 700 employees, said Laurie Clark, the director of compensation. Faculty members are exempt, she said, but others, such as admissions officers and some athletic coaches, will fall under the new overtime rule because of the increased salary ceiling, she said.

The university system will have to track affected employees’ time, she said. Admissions officers and coaches, Clark said, are particularly affected because their work varies with the seasons. Those employees also have a lot of travel time, to recruit athletes or stage presentations for high school seniors about the university, and the time spent on the road will need to be compensated.

She said the university system may seek to offer employees compensatory time off instead of overtime as a way to control costs, although most private employers don’t have that option. Workers near the $47,476 pay level could get a small raise to put them over the limit, Clark said, and therefore make them exempt from overtime.

“That’s a possibility. We’d need to work with management and unions on that,” she said.

The $47,476, which works out to $913 a week, was determined by the government based on the 40th percentile of full-time earnings in the poorest regions of the country.

Companies are going to have to work on new policies and explain the new rules to affected workers, said Joanna Bowers, a lawyer with Verrill Dana who specializes in employment law.

“It’s a little complicated,” she said, and can be affected by things such as bonuses and employee classifications.

The administration announced last year that it was planning to change the rules for overtime, although at the time officials said they were considering raising the pay limit to $50,440.

Still, Bowers said, a lot of companies aren’t ready.

“We’ve been trying to educate them for months, but despite that, a lot of employers are behind the ball on this,” she said.

DIFFICULT TRANSITION AHEAD

A major change for many of the workers will be a shift from being paid a salary to hourly wages so that the overtime pay can be calculated.

Bowers said employees may miss the flexibility that a salary offers and “the status that comes with that.”

Julie Rabinowitz, spokeswoman for the Maine Department of Labor, agreed.

“That’s going to be a culture change,” she said, noting that hourly pay generally requires more set hours and established breaks during the day. Salaried workers accustomed to eating lunch whenever their schedule suits them or leaving early some days and making it up on a different day may miss that flexibility, she said.

And employers will need to keep better records to make sure they don’t run afoul of labor laws, Rabinowitz said.

“It’s going to be a difficult transition for both employers and employees,” she said.

Rabinowitz and Bowers said employers who don’t pay required overtime or intentionally misclassify employees as managers can be sued by employees. In those cases, aggrieved workers can ask the court to award triple damages – three times the amount of lost wages.

“There can be huge financial consequences, and employment lawyers are getting the word out,” Bowers said.

IMPACT ON OFF HOURS, WORK TRAVEL

Those consequences likely will generate a lot of interest in a session on the new rules that Clark Insurance is holding at the Portland Country Club Wednesday, said Tony Payne, vice president of business development for the agency. A similar session last fall, when the rules were still in the proposal stage, drew about 170 people, Payne said.

He said the new rules will require employers to seek restrictions on what workers do during their off hours. An hour or two at night spent responding to emails could put workers into a situation where they accumulate overtime.

“People are used to just throwing a few hours in to help out during a crunch,” Payne said. “Being told you can’t do that puts you in a sort of wage-and-hour mindset.”

It will be especially difficult for those in jobs requiring a lot of travel.

“Sending people to trade shows, sending people to seminars, that’s going to be really hard,” he said.

The new rules have generated some opposition.

Godfrey Wood, executive director of Habitat for Humanity of Greater Portland, said nonprofits like his organization operate on very tight budgets and can’t adjust to a sudden increase in payrolls to pay overtime.

“There are a lot of businesses and nonprofits that don’t have the ability to pay more,” he said. “It’s well-intended, but there’s only so much room” for higher costs.

A CHANGE IN STAGES PREFERRED

Some organizations may need to hire more employees to avoid paying overtime, he said, and established employees could see their hours cut as a result.

Wood said he would have preferred that the salary limit be raised in stages.

“The magnitude of the change is overwhelming,” he said. “We could support something more gradual.”

Maine Sen. Susan Collins agreed, putting out a release Wednesday afternoon saying the new rule “will be extremely damaging to small businesses, universities, nonprofit organizations and service industries, particularly in rural states like Maine.” Collins said she supports an increase in the salary ceiling, but “a huge and sudden increase like this could hurt workers and employers alike.”

Collins said she is a co-sponsor of a bill that would eliminate the new rule and require the Department of Labor to consider the impact of the change and reflect regional pay differences in setting the new salary limits that trigger overtime.

Related Stories