President Obama and the FLSA have mandated that effective 12/1, anyone earning less than $47,500 a year must be paid overtime (there is one glaring exception but more on that later).
For those who don't know me, I'm a successful entrepreneur, all around supporter of increased minimum wage, single-payer healthcare and more.
That said, this new FLSA rule is nuts. Another entrepreneur/friend of mine with hundreds of employees who will be eligible for OT under the new rule said his plan is to fire a third of his eligible team, give the rest raises to get them over the $47.5k threshold and then require those employees to work 50-60 hours/week.
That's not my plan, but it's certainly going to happen somewhere.
Our Merry Band of Artists
We are one of the fastest growing privately held companies in America according to Inc. Magazine. In less than ten years, we have grown from my wife and I plus one part-time employee working out of our house to 75+ employees including 50 white collar jobs and 25 factory jobs. We are in the business of creating and curating art for hospitality and provide good paying local jobs - with benefits - to artists, among others.
Why The New Rule Was Created
Near as I understand it, this new FLSA rule is aimed at a range of businesses including but not limited to large corporate firms (e.g., Walmart) who pay managers less then $47,500/year and schedule them for 50-60 hours/week, plus weekend, holidays, etc. and in markets where other jobs are scarce.
By way of example, I'm met a woman who was promoted at a local McDonald's franchise to where she was managing five stores, paid $24,000/year, and told she would never get a raise (or overtime). This woman may never be capable of succeeding at true white collar office management work, but she was certainly capable of leading a group of hourly labor employees.
The Cost to Us
We have 32 young, promotable employees who fall under the $47.5k cap. If each of them worked just one hour of OT/day, then our annual exposure would be +$280k. Quite simply, that money does not exist in my organization.
The Challenge for a Client Driven Service Business
We built our business by saying "yes" to clients. our clients are all over the country - every time zone. And we work on spec. Which means we create art and then, if the clients like it, months later, and after a raft of approvals, we'll see a purchase order and eventual revenue.
Think of it as what we do as if you're drafting a bill - all the time and effort that goes into crafting legislation. Months, sometimes years later, and after a lot of back and forth and eventual approvals, the draft is voted into law.
Getting art into a hotel isn't much different - with the key distinction that if all the approvals don't fall into place, instead of a bill failing, we don't get paid for our work. Add to this that we're in a highly competitive field and we must respond when clients call with requests. While we are largely a 40/hour a week shop, we are not always. That's the nature of being in the client service field.
Our Regular Hours = 37.5/week - New FLSA Law Will Force Us to Make that 40!
Our standard hours are 9-5:30 with an hour for lunch. That totals 37.5 hours/week. Clearly some folks come in early and stay late. Now, imagine a scenario in which 30 non-eligible people work 37.5 hours and 15 people eligible for OT work 45 hours in a week. That would be bad for our bottom line, so effective 12/1, our new hours will be 9-6 with an hour for lunch. That's less time that folks have with their families and is effectively mandated by the new FLSA laws.
Cutting Minimum Wage Workers Wages to Pay OT to White Collar Workers
We may have to cut wages at our factory. This is not trivial. The minimum wage in North Carolina is $7.25/hour. The living wage for single person in Alamance County, where our factory is is $11/hour. Our current self-proclaimed minimum wage is currently $10/hour and we're stair stepping it higher as profits permit. Our goal is actually $14/hour which is the living wage for a double income/2 kid HH in Alamance County. That said, if we need to find money to pay white collar workers OT, it has to come from somewhere, the result may well be that we are forced to cut factory labor to the minimum wage. I can't imagine that's the intent of the new FLSA rule.
Who is Worth Less than All Other Americans
There's more - imagine an entire class of employees who are ineligible for this OT ruling. You might be amazed to find out who we've carved out as second class citizens in America - whose time and work we value so callously as to mandate by law that they are the only people who can be worked endlessly without compensation. Stay tuned for who this group is and my proposed solution to the actual problem this rule is attempting to address in the next installment.
Read Part Two