Aggressive new overtime rules would be difficult for employers to navigate
Last month, the Washington State Department of Labor and Industries (L&I) proposed significant changes to the state's existing overtime rules that could curtail the growth of employers and have devastating consequences for our rural communities.
Under the proposed rule, all employers would be required to pay salaried employees at least 2.5 times the state's minimum wage by 2026, which equates to $79,872 per year. Any employee making less would be eligible for overtime pay. This rule change, which would take effect in July 2020, represents a threefold increase from the current overtime threshold.
While large companies may be able to foot the bill of what would essentially be a massive minimum wage hike, many small employers, nonprofits and businesses in rural areas would likely not be so fortunate.
In order to comply with the new rule and still be financially viable, smaller employers would likely look to turn salaried employees into hourly employees, which would result in less flexibility in their schedules and fewer opportunities for them to advance their careers.
Not only would that lead to a dip in workplace morale, but productivity would suffer as well. And if employers opt against making this change, they'll likely be forced to cut services as they tighten their bottom line to absorb the financial hit from L&I's mandate.
This also begs the question of how employers in rural counties will fare when faced with this new rule. The one-size-fits-all approach L&I is taking doesn't seem to make much sense when you consider the cost of living in rural areas is much less than in urban and suburban areas.
Nonprofits would also be hurt, as most simply don't have the opportunity and/or flexibility to raise prices to mitigate the impact of such sweeping salary increases.
How about the businesses in our Oregon-Washington border communities? Oregon's salary threshold is tied to their minimum wage, but at a much lower rate than what's being proposed here in Washington. Businesses looking to the future and trying to decide where to set up shop are going evaluate this new mandate, and many are going to opt for our neighbor to the south. This, combined with the Democrats' decision to all but eliminate our nonresident sales tax exemption for Oregonians, makes you wonder about the future of the business community in Southwest Washington.
While no one is arguing against updating the state's overtime threshold, which is almost four decades old, workers in Washington are currently covered by the federal threshold – which is also being updated. In 2004, L&I aligned itself with federal standards. Why not at least take the time to properly evaluate the new federal proposal before going forward with a state plan that could hurt thousands of Washington businesses?
L&I is holding public hearings on its proposal in July and August, including a hearing at Clark College Columbia Tech Center in Vancouver on August 15 at 10 a.m. Employers and employees should make their voices heard by attending the hearing in Vancouver or submitting written comments to EAPrules@LNI.wa.gov. The deadline to submit comments is Sept. 6.
As it stands now, the department's proposal is too aggressive and could be detrimental to businesses across the state. For the sake of all Washington employers and the workforce, we hope L&I will proceed with caution.