Are You Ready if Obama Redefines ‘Exempt’ Employees?
If you watch any of the true crime shows, you’ll notice that when the bad guys gain entry to a home, they usually break in through the back door.
Politicians operate the same way.
We’re seeing that right now with President Obama giving marching orders to his regulators and administrators with the hopes of achieving goals that he cannot accomplish through democratic, constitutional means. One of these that’s coming up soon could severely reduce the profitability of many small businesses.
It all has to do with employees who are classified as “exempt.” These are salaried workers who are categorized as either administrative, executive or professional, and make a minimum of $455 per week, or $23,660 per year. When those requirements are met, these employees need not be paid overtime when they work more than 40 hours per week.
Minimum salary could more than double
President Obama wants to increase the minimum salary requirement in this equation. The numbers being discussed range from $50,000 per year to as high as $56,000 per year. (Can you tell that most of the advocates for a much higher salary threshold live and work in the Washington D.C. area, where the salary-reality is out of whack compared to most areas of the nation?)
Unable to push through a wholesale raise in the federal minimum wage, President Obama is using the regulatory authority of the Department of Labor in an attempt to force employers to raise wages. Small business, big business and workers in both realms would feel the effects of this change.
I don’t have a crystal ball to accurately predict what the outcome will be if the DOL is able to double the salary threshold. However, I don’t think I’m going out on a limb when I say that most employers will simply reassign workers or reclassify these positions as hourly and cap hours below 40 to avoid overtime costs. (Ironically, many employees have already had their hours reduced to less than 30 to avoid Obamacare mandates. The president must realize that these measures end up hurting workers more than helping them. Right?)
Flexibility may be lost
Generally, these kinds of salaried positions give greater flexibility to both employers and employees. One week, extra hours may be required. The next week, fewer hours may be necessary. At every place where I’ve worked, employers understand this and allow their exempt employees to take time off after they have pulled long shifts.
Further, some states have already set a higher salary threshold and this is how our republic is supposed to work. In the same way, many states have set a higher minimum wage than the federal minimum wage. Again, this is the way framers envisioned the US Constitution functioning, and if allowed to work, it works!
I think the entire debate reflects how poorly politicians understand business, economics and management. Most business leaders know that iron-fist, top-down management is counter productive. However, our elected officials in Washington operate under the misguided belief that they know what is best for everyone: Anything deemed bad must be outlawed, anything deemed good must be mandatory.