ALBUQUERQUE, N.M. — A federal plan to expand the number of workers eligible for overtime pay will mean a “significant” cost to local businesses that likely will end up hurting employees in the end, say some Albuquerque business leaders.
The head of the state’s restaurant association, though, says the proposed rule announced Tuesday will have a limited effect.
Labor representatives say the issue is one of fairness and making sure employees are paid for the hours they work.
The change to U.S. Labor Department rules would raise the salary threshold that determines who is eligible for overtime. The current level of $23,660 a year — $455 a week — would rise to $50,440 a year, or $970 a week.
That means salaried employees paid below the $50,440 mark would be eligible for overtime when they work more than 40 hours a week. The last time the threshold was updated was 2004.
The Labor Department estimates nearly 5 million Americans will benefit from the plan, including 20,000 in New Mexico. President Barack Obama described the plan as a way to boost the middle class. Estimates are it will cost employers between $240 million and $255 million per year in direct costs.
Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce, says the plan is “such a big, one-size-fits-all policy that the cost will be significant” and will lead to cuts in jobs and work hours.
Also, she said, “In the end, if employees are paid more, then that cost is going to be transferred, likely, to customers. Those employees will be paying more for those goods and services. They’re going to be hurt in the end.”
She said the chamber would make its views known during the 60-day comment period, after which the Labor Department could issue the new rule without congressional approval. However, Congress could try to stall it through legislation.
Carol Wight, CEO of the New Mexico Restaurant Association, said it is unlikely the change would have a major impact on the local restaurant industry because many salaried managers already earn more than the proposed threshold.
“I don’t think it’s going to have a devastating effect,” Wight said.
She cited federal labor statistics for the Albuquerque metro area that put the estimated median annual salary for a food-service manager at $59,600 in 2013.
It would affect entry-level managers, however, who made an estimated $40,250 annually in 2013. Wight said employees in that category would either become qualified for overtime under the rule or get raises. But she figures they’re in the minority.
“Some restaurants are probably paying $35,000 to managers, but I don’t think there’s very many. We can’t get good people and keep them for that amount of money,” she said.
Robin Gould, staff representative for the Communications Workers of America, said those who would benefit are middle-income employees, particularly women.
“If you’re going to require a person to work 40 hours a week and be away from their family and not have their rest time, then there has to compensation that goes along with that,” she said.
Jon Hendry, president of the New Mexico Federation of Labor AFL-CIO, said the threshold should have been raised over the years to keep up with inflation. “We should have been revisiting it every year, so we wouldn’t be in shock,” he said.
To keep up with future inflation and wage growth, the proposal will peg the salary threshold at the 40th percentile of income.
Mick Rich, owner of Mick Rich Contractors in Albuquerque, agreed with Cole that certain workers would actually be hurt by the proposal — specifically millennials, college students and college graduates.
He pointed to an assistant project manager on his staff who trained as an architect and is now learning on the job all there is to know about the contracting business. She is salaried and works closely with another employee to “get her up to speed.”
He said it’s an investment his business is making, even though it may take her longer to get the job done until she’s fully trained.
Rich said she is typical of young workers who may not have experience but do have “a willingness to work.”
Businesses that have to start compensating for all those hours might simply stop hiring young workers, Rich said.
“It’s so hard to get started in any industry,” Rich said. “If it means me paying my dues and (working) some extra hours, I’m going to do that.”