Most of you have heard the uproar in the press about minimum wage. Some of you may have heard the stuff about changes in the Fair Labor Standards Act and other wage and hour issues. I wanted to set the record right about these things.
First… none of this stuff has been put in place unless you are a government contractor. As of January 1, 2015 all federal contractors or subcontractors will have to be paid a minimum of $10.10 per hour. It is to be reviewed annually but is to never be less than that amount. (Of course a future president could overturn this executive order, but that would be pretty unpopular, so unlikely.) If you are subject to the regulations of the Office of Federal Contract Compliance you need to be prepared to make your changes.
For everyone else an increase in the Federal minimum wage is just a movement. Legislation is unlikely anytime soon. Naturally that is subject to the outcome of the midterm elections this year, but given that the Republican control of the House is unlikely to change nothing will happen this year.
However, this is a change whose time will come. There is ever increasing pressure socially to move it and states and municipalities are making the change. Seattle just announced a phased in increase raising the minimum wage to $15 per hour by 2017. So regardless of party affiliation I think the pressure from voters will be significant enough to force legislators to pass a Federal increase, probably within the next three years.
Tied up in this is the concept of changing the salary level to be considered an exempt employee. The President directed the Wage & Hour division of the USDOL to review the standards of who is exempt from being paid overtime and who is not. Currently the salary requirement for being exempt is $455 per week ($23,660 per year). Obviously that is not a high hurdle. There are other requirements to being exempt, but if that level is changed it will remove A VERY LARGE NUMBER OF PEOPLE from being exempt. The level being suggested by some is $1000 per week. That is $52,000 per year. At that level anyone who is currently exempt that does not make that salary will not qualify for an exemption.
The impact this will have is that anyone who makes less than that will have to be paid overtime for any hours they work that are greater than 40 in the week. It will cost more money, it will be a huge administrative task to now accurately track ALL the time employees work so you can then pay them time and half. Someone working 45 hours a week, not an unusual occurrence, could cost you around $180 extra per week.
So this change will be significant. This does not have to be passed on by Congress. This is strictly a regulatory change. And it will occur. The $$$ amount is unknown. But it will have an impact on your businesses.
It will not occur in 2014, but might be effective as early as 2015. They have to propose the regulations, publish them in the Federal Register, wait for public comment, hold hearing and then republish them with an effective date. Best estimated time will be July 2015 more likely January 2016.
Everyone needs to start thinking how this will change things and start budgeting. Understand how your process may be affected and start preparing for the change. I will keep you informed of what is happening, so stay tuned.