New Overtime Threshold Could Disrupt Payrolls, Revamp Job Classifications, Trucking Execs Warn

This story appears in the May 30 print edition of Transport Topics.

Across the trucking industry, companies should be prepared for some type of financial disruption due to the new Department of Labor rule on overtime pay, a senior official with American Truck Dealers told Transport Topics.

The rule would disrupt the compensation plan that has been worked out between employee and employer, Douglas Greenhaus, chief regulatory counsel at American Truck Dealers, said a week after the rule was unveiled May 18.

“Even if you’re going to get the same or more money, it’s disruptive,” added Greenhaus, whose organization is a division of the National Automobile Dealers Association. His group represents new car and truck dealerships.

The rule is likely to affect the dispatchers and operations personnel at trucking companies, American Trucking Associations spokesman Sean McNally said.

To manage the rule’s effects, Greenhaus suggested firms start adjusting pay structures that ensure worker retention and shield companies from overwhelming financial burdens. This strategy for dealing with employees who would qualify for overtime under the rule should be carried out as painlessly as possible.

Brumbaugh

A reclassification of employees as hourly workers also may prove successful if workplaces embrace sound communication with management, Greenhaus said.

“It’s going to force employers to have to make adjustments to the [pay] plan that even if they turn out to be as much or more net … can cause angst,” he added.

On May 18, the Department of Labor unveiled its rule, setting at $47,476 the minimum salary for overtime exemption from the current threshold of $23,660. The rule goes into effect Dec. 1 and would make about 4 million employees eligible for overtime pay, the agency said.

Backers of the rule say the new threshold will clarify which workers are supposed to be eligible for overtime. Opponents predict it would prompt firms to downsize.

For companies, such as Ohio-based Garner Transportation Group, the threshold increase may prove too burdensome. Raising the threshold incrementally would’ve been more ideal, company CEO Sherri Garner Brumbaugh said in an interview with TT.

“We are just digesting the rule right now, trying to figure it out,” Brumbaugh said. “There was no input, or it appeared to me there wasn’t any input from business and how it would affect our business.”

There also is the potential that employers may diminish or lessen their workforce to accommodate for the new rule, added Brumbaugh, also a vice chairman at ATA.

Not everybody is expecting a disruption, though. For UPS Inc., which ranks No. 1 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, the rule should not have a major effect.

“UPS’ compensation levels substantially meet or exceed the proposed regulatory thresholds, and, therefore, we anticipate minimal adjustments to our exempt workforce,” spokeswoman Kara Ross said.

FedEx Corp., which is ranked No. 2, indicated it complies with Department of Labor requirements and is reviewing the new regulations.

Still, ATA, along with the National Retail Federation and the U.S. Chamber of Commerce, said many companies will find it difficult to increase wages, as well as using the timekeeping systems for dealing with the rule. The result could be firms that transition employees to clock-in, clock-out wage workers.

“An increase in overtime eligibility does not mean an increase in overtime pay. It’s a career and morale killer,” said David French, senior vice president for government relations at the National Retail Federation. “Retailers surveyed indicate half of their current salaried workforce will be reclassified as hourly as a result of these rules, and uniformly agreed that reclassifying career professionals will damage employee morale.”

On Capitol Hill, Republican leaders vowed to fight the rule. Calling it an “absolute disaster,” House Speaker Paul Ryan (R-Wis.) said the rule affects the people it aims to help.

“By mandating overtime pay at a much higher salary threshold, many small businesses and nonprofits will be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether,” Ryan told reporters this month.