In March 2019, the U.S. Department of Labor issued a proposal to expand the rules regarding mandatory overtime pay to include one million additional workers. This proposal and others like it have been bouncing around the government pipeline for years, but to no avail. Could this long-awaited proposal help workers increase their earnings? And what effect would an overtime pay expansion have on the construction industry? In this article, a construction attorney from Clarksville, TN, will discuss the implications of such an expansion and discuss the details of this recent proposal.
Overtime Pay By the Numbers
This isn’t the first time the Labor Department has attempted to expand overtime pay to more workers. In 2004, they established that any employee earning less than $23,660 was entitled to receive overtime pay. Although this figure was doubled to approximately $47,000 in 2016, effectively extending mandatory overtime pay to an additional four million workers in the United States, a federal judge in Texas ruled that this limit was too high and threatened to overextend overtime pay expansion to management workers who were legally exempt from overtime pay protections. As a result, the threshold for overtime pay protection remains at $23,660. The recent proposal would raise this figure to $35,308.
Overtime Pay Expansion and the Construction Industry
According to Labor Secretary Alexander Acosta, the proposal would “bring common sense, consistency, and higher wages to working Americans.” Unpaid overtime is a common issue in the United States that often results in class-action lawsuits and exorbitant settlements costing companies millions of dollars. Employers argue that raising the salary threshold for overtime pay protection could lead to even more lawsuits. To contend with such a change, employers may be forced to cut workers’ hours to avoid the time-and-a-half bonus attached to overtime hours.
For reference, the median salary for construction workers was $34,530 in 2017. This positions the majority of construction workers just below the proposed salary threshold. For contractors, who are already facing a skilled labor shortage, this change would require a high degree of planning to keep costs low and projects profitable. Some contractors may have to reassess their building initiatives and reformat their business strategies to account for increased wages that may be needed to finish projects.
So what are contractors’ options? You could cut hours or wages to account for the new overtime protections, but your workers wouldn’t be happy about it and projects may take longer to finish. Otherwise, you could absorb the cost at the risk of lowered profitability. Either way, this change would have a noticeable effect on contractors, especially those with smaller companies and, therefore, less wiggle room to make these types of changes. Before making any sweeping changes to your contracting business, consult a construction lawyer from Clarksville, TN, to get a better understanding of your legal obligations to your employees.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.