AWB warns of unintended consequences from new overtime rule. An additional drag on small business hiring?

The state’s new overtime rule presents significant challenges to employers. In a statement, Association of Washington Business president Kris Johnson says,

We’re disappointed officials chose to raise the overtime threshold by such a large amount. The current rule needed updating, but this new rule will require employers to pay salaried workers more than $83,000 per year by the time its fully implemented. This is a huge increase over the current rule, and one that is likely to carry unintended consequences, especially for small businesses and nonprofit organizations.

For small businesses and nonprofits that can’t afford to pay overtime, the new rule could lead to a reduction in services or program offerings. It could also force some organizations to reclassify employees from salaried to hourly positions, leaving employees with fewer opportunities for advancement and a loss of schedule flexibility.

The Spokesman-Review also reports on business response to the change.

Bob Battles, general counsel and government affairs director for employment law for the Association of Washington Business, agreed the old state thresholds were out of date. But the newer higher levels in the later years could have unintended consequences, he said.

“Small businesses and nonprofits are not going to be able to afford this,” Battles said, while some employees might lose chances for advancement that come through working extra time and learning a business.

The L&I action may not be the last word.

Because the new state thresholds will remain below the federal thresholds through 2020, the Legislature will have “a window” to make adjustments to the rules that the AWB could support, he said.

Significantly, the revised overtime rule comes at a time when small businesses continue to struggle to find qualified workers, even as they boost compensation. The Associated Press reports,

Two reports last week show that small business hiring still lags behind the strong job growth reported at larger companies, and that owners are unlikely to increase their staffs significantly in 2020.

Payroll processor ADP said its customers with up to 49 employees added 11,000 jobs in November, one of the weakest showings this year…

A quarterly survey released last week by the U.S. Chamber of Commerce and MetLife showed that owners are sticking to their cautious hiring.

Reflecting a theme sounded by AWB, the AP points out small business face particular challenges in hiring.

Small businesses have reported for several years that they’ve been unable to find qualified candidates for their job openings. That’s a problem large companies also face, but they have an advantage over smaller employers because they’re able to offer higher salaries and more attractive benefits, putting the smaller players at a disadvantage in recruiting and retention. Many small businesses are also conservative about hiring, and don’t take on new staffers until they already have the revenue to justify the added expense and risk of expanding their payrolls.

Johnson closes his press release saying,

We look forward to working with legislators in the upcoming legislative session to address the concerns this raises, both for employers and employees.

The negotiations should continue.