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New Overtime Rule Could Weigh Heavily on Retail

Workers’ wallets will get a little fatter come Dec. 1 when the updated overtime rule kicks in, but retailers will be feeling the pinch.

The U.S. Department of Labor published a final rule updating overtime regulations to include greater protections for middle-class workers and more fair compensation. Within the first year of implementation, the final rule will automatically extend overtime pay for 4.2 million workers.

Put simply, the rule raises the amount of money executive, administrative and professional workers need to make before being exempt from earning overtime pay.

So salaried employees making less than $47,476 a year will automatically receive overtime pay for working more than 40 hours in the week. That’s double the current $23,660 threshold, and the salary level will be updated every three years commensurate with wage growth in the South, the lowest-income Census region.

While workers—the more than four million of whom will have their pay increased by roughly $12 billion over the next 10 years—may be shouting from the rooftops, business-minded types will be shouting at Congress.

Republicans are reportedly rallying to attack the overtime rule with a disapproval resolution, and efforts to thwart the rule are underway. Democrats appear more of the belief that the update was long overdue.

Many companies are likely to increase worker salaries above the threshold to avoid paying the time and a half for overtime hours. Others might cut employees’ hours to fewer than 40 so they don’t have to pay the overtime.

David French, senior vice president of the National Retail Federation, doesn’t think employees are going to see overtime pay at all.

“An overtime rule does not mean more overtime pay, but it almost certainly will mean more overhead costs for more employers,” Bloomberg reported French as saying on a call. “In many cases, the costs are significantly higher than the potential benefits available to employees.”

The rule is expected to take effect on Dec. 1 and the new compensation requirements will be in order from that day. From there, the thresholds will be automatically updated every three years starting Jan. 1, 2020.

“We remain concerned about the adverse impact that this mandate will have on our members, particularly our government contractors who are working on contracts that do not anticipate such labor cost increases,” Steve Lamar, executive vice president of the American Apparel and Footwear Association (AAFA), said.

Source: U.S. Department of Labor

Source: U.S. Department of Labor

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