As America Gets Back to Work Will Overtime Be an Issue?

As America Gets Back to Work Will Overtime Be an Issue?

 

America is entering uncharted territory as the states gradually begin reopening from the coronavirus shutdown. Opinions of how things will go cover the entire spectrum from overly optimistic to dreadfully pessimistic. One question some employers are asking is whether or not overtime will be an issue.

Overtime is part of the normal routine for some employers. At least it was before the COVID-19 pandemic. Others tended to stay away from it at all costs. Then there are those employers who operated somewhere in the middle. They relied on overtime when necessary but kept it to a minimum otherwise.

No one really knows how the recovery will transpire. As such, employers cannot be sure what their overtime strategies will be. Some don’t even know if they will have enough employees to reopen, or too many employees and not enough work to keep them busy. It is all a big mess.

Overtime and Hourly Workers

One thing we do know is that the laws governing overtime have not changed. Once workers start returning, employers will be required to track overtime and pay employees accordingly. For example, hourly workers who do not qualify as exempt must be paid 1.5 times their normal rate for hours worked in excess of 40 in a given work week.

This could prove problematic if employers need a limited number of workers to put in overtime but do not immediately have the revenues to cover the higher rate. Restaurants immediately come to mind. A restaurant operating at 25% capacity may not be able to bring back all of its employees. Those that do come back may be asked to work overtime. And yet, 25% capacity may not bring in enough revenue to cover payroll.

It is possible that a paycheck protection loan obtained under the CARES act could address this issue. But what if an employer has already used the entirety of the loan to keep workers employed during shutdown? Revenue could still be a problem during reopening.

Overtime and Exempt Workers

One means of avoiding issues with overtime and hourly workers is to give more responsibility to exempt workers. Whether doing so is right or wrong is a topic for another post. For the purposes of this post, the more important issue is the new overtime rule that went into effect at the start of the year.

According to Dallas-based BenefitMall, the new overtime rule increased the standard salary threshold for exempt employees. It jumped from $455 to $684 weekly. Any exempt worker who makes less than the threshold is still entitled to overtime pay for excess hours.

The restaurant industry again comes to mind. Restaurant managers may be putting in longer hours during reopening to cover for other employees who either do not come back or are not asked to come back. Any managers eligible for overtime pay will actually cost more than the employees they are covering for. So there’s a catch-22 here.

Going Back Without Overtime

Overtime could be a pressing issue for employees as well. While employers try to make financial ends meet, employees who depend on overtime to balance their budgets may find themselves between a rock and a hard place too. They want to come back to work, but a lack of overtime might mean they cannot earn enough to pay their bills.

The reality of COVID-19 is that it has affected business in ways nobody could have foreseen. As America begins the reopening process, we are going to start to see economic damage that wasn’t planned for. Issues relating to overtime barely scratch the surface.

Categories: Business

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