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DOL’s New Overtime Rule, Small Business, and the Community Non-Profit

Author

Graham Cobb
June 27, 2024

Bonus Post!

In advance of “Casual Friday,” I offer you “Thoughtful Thursday Evening.”

The U.S. Department of Labor (DOL) has introduced a new overtime rule, effective July 1, that raises the salary threshold for exempt employees from $35,568 to $55,068 annually. Texas has filed a lawsuit seeking to block the enforcement of this rule, arguing that it imposes significant financial and administrative burdens on employers. 

The new rule aims to extend overtime protections to more workers, ensuring they receive additional compensation for hours worked beyond the standard 40-hour workweek. Texas contends that the rule will create undue hardships, particularly to small organizations, leading to increased operational costs and administrative complexities.

I was having lunch with a group of business leaders least week and someone raise this issue. Admittedly, it was not on my radar. So I did some light research.

I hope we all agree that people should have the chance to earn more, learn more, and live well. This includes a livable wage and wages should grow in line with increasing cost of living.

Let’s consider the information below and the potential impact to the small business owner and the community non-profit. Yes, non-profit organizations would also be impacted by the rule. Non-profits are not exempt from federal labor laws, including the Fair Labor Standards Act (FLSA) which the new overtime rule seeks to amend.

It’s a big step. And it’s a step worthy of watching.

Best!

GC

Potential Impact

  1. Financial Strain
    The increased salary threshold would require these organizations, often operating with limited financial capacity, to either raise salaries to maintain exempt status or pay overtime wages, leading to:

    • Increased labor costs, potentially reducing profit margins.

    • Potential need to adjust pricing structures or reduce workforce to manage expenses.

    • Delays or reductions in other business investments due to reallocated funds.

  2. Administrative Burdens
    Implementing the new rule would necessitate considerable administrative adjustments, including:

    • Revising payroll systems to accurately track and compensate for overtime.

    • Reclassifying employees and ensuring compliance with the updated standards.

    • Conducting training sessions for HR and management staff to navigate the changes.

  3. Employee Morale and Retention
    Previously exempt workers that now fall under non-exempt status might perceive the change as a demotion. Conversely, those who benefit from overtime pay may experience increased job satisfaction.

    Either way, water cooler talk is going to get interesting…

  4. Funding Challenges

    • Non-profits may find it challenging to secure additional funding to cover increased labor costs. Grant-making organizations and donors might not be able to provide the necessary financial support quickly enough to offset the additional expenses.

Median Salaries for Small Business Workforce

Let’s contextualize the impact of the new overtime rule. Based on median salary, these positions could be affected.

  1. Office Manager:  $50,000

  2. Administrative Assistant: $38,000

  3. Sales Representative: $45,000

  4. Customer Service Representative: $35,000

  5. Marketing Coordinator: $48,000

  6. Bookkeeper:  $42,000

  7. Retail Store Manager: $47,000

  8. IT Support Specialist: $55,000

Recommendations

The DOL’s new overtime rule presents significant challenges for small businesses and non-profits. Leaders should closely monitor the legal proceedings and prepare for potential adjustments to their operations.

  1. Conduct Financial Impact Assessments

    • Evaluate the potential cost increases associated with the new rule and explore budgetary adjustments.

  2. Develop Compliance Strategies

    • Prepare for possible implementation by revising payroll systems, reclassifying employees, and providing necessary training.

  3. Engage in Advocacy

    • Join industry groups in advocacy efforts to influence the final outcome of the legal challenge and the DOL’s rule implementation.

Need a partner, a pal, a shepherd or a sherpa to share the load, maximize your output, and build capacity? 

Paceline Strategies is here for you. 

Graham / Founder, CEO