Tri-City employers balk at state’s overtime proposal

By Andrew Kirk

Several Tri-City employers and nonprofit leaders

criticized the state’s proposal to overhaul its worker overtime exemption rule

at a recent public hearing, citing concerns about their bottom lines and

ability to serve customers and clients.

More than 50 people attended an Aug. 6 hearing in

Kennewick—one of seven meetings held across the state—to provide feedback on Labor

and Industries’ proposed changes to significantly increase the minimum amount

employees must earn before they can be exempt from receiving overtime pay.

The changes, which affect executive, administrative and professional workers, as well as outside salespeople, across all industries, would mean employers will have to provide minimum wage, overtime and paid sick leave, or increase salaries to those who were previously considered exempt.

Joshua Grice, Labor and Industries’ employment standards

program director, said employers would have to convert employees to a

non-exempt status qualifying for overtime pay and receive sick leave, limit

their hours to 40 per week, or convert salaried workers to hourly wages, or

give a worker more responsibility and a raise to meet the new criteria.

Many business owners said they were concerned the

compensation laws they’ve been following for decades could change drastically

in a matter of months. The new rule would take effect next year.

Nolan Lockwood of Harvest Foods, an independent grocery

store in Walla Walla, and Cindy Goulet, owner of two Richland restaurants, 3

Eyed Fish and LU LU Craft Bar + Kitchen, both said they use the law to pay

low-level managers who appreciate the stability of a salary despite not making significantly

more than coworkers. Both grocery stores and restaurants have slow and busy

weeks depending on the season, and the exemption allows owners to keep

experienced supervisors on site at all times, while hourly workers are called

in or sent home—or even terminated—depending on demand.

Carolyn

Logue, who spoke on behalf of the state Heating, Ventilation and Air

Conditioning Contractors Association, said such an arrangement is necessary in

her industry for safety. Supervisors inspecting electrical work need to be free

of time constraints. If they were worried about how much overtime they would be

billing the company, they couldn’t be relied on to take their time. HVAC

technicians are likewise subject to slow and busy months, resulting in hourly

workers earning inconsistent paychecks.

After-hour

emergencies also mess up 40-hour work-week schedules and/or force a company to

lose money on a job after paying the overtime, Logue said.

“We

don’t want someone who can do a job quickly advantaged over someone who will

take their time and do it right,” she said.

Daniel

Aspiri, executive director of Domestic Violence Services of Benton and Franklin

Counties, said his office uses the exemption to provide salaries to trained

professionals who respond to cases around the clock. Restricting them to

40 hours per week would limit the number of people served and result in

paying overtime that would deplete the nonprofit’s operations budget, which

relies on grants and donations.

Representatives

from several Tri-City area nonprofits—United Way of Benton and Franklin

Counties, Mid-Columbia Mastersingers, Boys and Girls Clubs of Benton and

Franklin Counties and others—testified about how the exemption allows them to

provide salaries to professionals who at times work more than 40 hours a

week (such as during fundraising events) and how paying overtime would decrease

the number of services they’d be able to provide.

Larger

nonprofits would have to follow the same rules as large companies, which could

not exempt salaried workers making less than $49,100 next year under the

proposal.

Tami

LaDoux, executive director of Tri-Cities Residential Services, works with

adults with developmental disabilities and said some clients spend months in

hospitals because area group homes don’t have enough staff to accept new

clients.

Lockwood

said his store is not a large company, but during the holidays it sometimes

employs more than 50 people. He said if this policy is implemented, he will lay

off at least one person and will not renew his lease to stay in business in

2021.

“The

Minimum Wage Act already forced me to go from 48 employees to 37… fewer

employees means less customer service,” he said.

Arlene’s

Flowers owner Barronelle Stutzman said she’ll have to come up with an

additional $24,000 to pay her novice florists next year and that much again

additionally the following year.

“The

minimum wage was not meant to be a living wage,” she said. “If your office had

to come up with $48,000 more in two years, how would you do that?”

Joel

Bouchey of Inland Northwest chapter of the Associated of General Contractors of

America said he knows of several companies that plan to move their offices to

Idaho or Oregon to avoid the new rule.

Steve

Simmons, founder of CG Public House & Catering in Kennewick, said the rule

would make it extremely difficult to hire qualified managers.

Goulet

said she would have to eliminate her manager-training program and most current

managers will make less as hourly employees.

Kim

Shugart of Visit Tri-Cities said those in the tourism industry definitely will

raise prices for consumers to pay for the new rule, especially restaurants.

Grice

said after the hearing that many employers statewide have expressed concern

about losing flexibility. The existing law allows them to offer employees

salaries without other protections hourly workers enjoy. The new law will still

allow flexibility, he said, but different strategies will have to be employed.

“If

someone becomes non-exempt, they may require more time tracking,” he said as an

example.

Tim

Church, public affairs manager for Labor and Industries, said there are too

many workers getting $25,000 per year and expected to work 60 or more hours a

week. When the exemption was first implemented, 60 percent of salaried

workers received overtime and now almost none do.

The

proposal increases the minimum salary to $35,100 next year for companies with

50 or fewer employees, with required increases every year to reach $80,000 by

2026, with updates annually to adjust for inflation.

White-collar

exempt workers would need to perform bona fide executive, administrative,

professional or outside sales work and be paid 1.25 times the minimum wage by

July 1, 2020; 1.75 times by Jan. 1, 2021; 2 times by 2022; 2.25 times by 2023;

2.5 times by 2026.

Companies

with 51 or more employees would have to pay exempt employees 1.75 times the

minimum wage by July 1, 2020; 2 times by 2021; 2.25 times by 2022, and 2.5

times by 2025.

The

proposal also modifies the definition of outside sales, but not the salary

threshold since sales wages vary month to month. The computer professionals

definition also would be modified and have a separate pay-increase scale.

Advocates applaud change

Not everyone had concerns about the proposal; some

employees and worker advocates applauded its intent.

Kenneth Buxton, who said he works in the hospitality

sector, spoke in favor of the proposed changes. He said he seeks a promotion,

but his supervisors regularly work 60 to 80 hours per week, filling in for

staff who don’t show. Instead of hiring or scheduling more people, his

employers save money by relying on the salaried workers to do the work they

were supposed to be supervising.

Two others commented they found statistics online

suggesting the average salaried employee works 49 hours per week. That’s almost

20 percent “free” work employers receive.

Jack Sorensen, who represented worker advocacy group

Civic Ventures, said Washington’s booming economy belies claims the minimum

wage increases are eliminating jobs. He asserted employers will adjust to the

new regulations if they learn to balance their books in ways other than working

people overtime while compensating them less than minimum wage.

“Some employers depend on the free overtime,” he said.

“The overtime protections fell so far behind we’ve forgotten how they work.”

After the meeting, Sorensen, a member of the nonprofit

sector, said he is aware of many large nonprofits finishing each year with

millions in excess. And donors to even small ones expect the organizations to

pay workers fairly. He said the assertion that nonprofit employees did not want

to be paid overtime was audacious.

Simmons said after the meeting that the hospitality and

restaurant industries have too often overworked low-salaried employees, but the

need to retain good workers counteracts the trend in the marketplace. Each new

generation of workers is less willing to accept that arrangement and employers

are adjusting on their own without new regulations.

Simmons echoed what nearly every business owner said

during the hearing: while the thresholds need to be updated, the state’s

proposals are far too high.

The U.S. Department of Labor is debating similar

measures with thresholds less than a third of what the state is proposing,

Grice said prior to the hearing.

“I have to believe that’s a salary level that’d concern

even our friends at the Hanford area,” Simmons said. “This seems like a really

big deal to me.”

History of exemption law

Grice provided some background on the nation’s exemption

rules prior to listening to public comment.

During the Ford administration, the government decided

an employee making at least $13,000 per year ($58,000 adjusted for inflation)

did not need a minimum wage guarantee, paid sick leave, overtime pay or tips,

he said. It was called the white-collar exemption to wage law, and the U.S.

Department of Labor defined it as people making a certain salary for

“executive, professional, administrative or outside sales” careers. Office

assistants were “secretaries” in 1976 so “administrative” referred to

university deans and similar positions. In the 1990s “computer professionals”

were added to the list.

In 1976 the state of Washington created a similar

policy, with the caveat that businesses would have to follow whichever

threshold was higher. When the Department of Labor increased the minimum salary

for the exemption in 2004 to $23,600, that became the state’s new threshold as

well. But annual salary on minimum wage is now about $25,000 and soon will be

$28,000, making the salaried exemption for overtime wages less white collar—and

less fair—every year, Grice said.

“There hasn’t been a room that hasn’t been pretty full

in five meetings so far. There is passion behind this issue and there are a lot

of details to learn,” Church said.

Timelines and deadlines

Work on the proposal began in March 2018. The public

comment period ends at 5 p.m. Sept. 6. The new rule would take effect July 1,

2020.

Formal public comments may be submitted by email to EAPrules@Lni.wa.gov; by fax at 360-902-5300; or by mail to: Employment Standards Program, P.O. Box 44510, Olympia, WA 98504-4510.

To learn more about the proposal, go to lni.wa.gov/WorkplaceRights/Wages/Overtime/OvertimeRules/default.asp.