UPDATE: DOL offers ‘token reduction’ in new overtime pay threshold (from the Washington Business Journal)
With the Department of Labor hoping to publish its well-intentioned but severely overreaching new overtime rules within the next few weeks, the Maryland Association of CPAs joined the American Institute of CPAs in Washington on April 27 in an 11th-hour bid to convince officials that the rule is a bad idea.
MACPA Executive Director Tom Hood (center in the photo at left) and Allen DeLeon (far left), founding partner of DeLeon and Stang in Gaithersburg and chair of the MACPA’s Legislative Executive Committee, joined AICPA officials in a meeting at President Obama’s Office of Management and Budget, which is in the final stages of reviewing the overtime rule.
The rule would increase the salary threshold for overtime exemption from $455 per week (or $23,600 per year) to $970 per week ($50,440 per year). Put another way, if the rule takes effect, anyone who makes less than $50,440 per year would be eligible to receive overtime pay. That means an additional 5 million salaried workers could receive overtime pay for any work they do above and beyond 40 hours per week.
Needless to say, America’s businesses are concerned, and the MACPA and AICPA voiced those concerns during their meeting with OMB officials. Among their comments:
- A 113-percent increase in the overtime threshold will be a shock to most employers, especially to small CPA firms, not-for-profit organizations, and local governments — a sizable chunk of the MACPA’s membership. Think about CPA firms that file tax returns for a second. Most of their salaried employees easily blow past 40 hours per week during tax season with the expectation that they’ll have plenty of comp time coming during the slow months of the summer. Under the new rules, those small firms would be required to dole out overtime pay to those employees, who would then lose the extra time off during the summer. “I don’t think (the DOL) even considered this unintended consequence,” Hood said. “Many CPAs who prepare tax returns value time off more than cash.”
- The rule would force employers to revisit flex-time and telecommuting policies, since the more costly overtime rule would disproportionately impact these reclassified employees. It will increase the likelihood that employers will be forced to micromanage staff and increasingly monitor the activities of remote workers to minimize costs. “It will roll back the advancements we’ve made over the past few years with regard to staff flexibility and work-life integration,” Hood said.
- The new rule will pile on additional compliance costs to organizations that are already swamped by the compliance burdens presented by issues like the Affordable Care Act and other major mandates. “The compliance costs will be exorbitant,” Hood said. “The rule will force employers to track people’s time more intensely. It will mean more record-keeping systems and an increase in the compliance and record-keeping costs.”
- Employers are concerned about the potential for increased litigation from former employees who believe they are entitled to overtime pay. More rules and details will mean trial lawyers will have more to argue about, and that, in turn, will lead to more lawsuits. Hood said there is already evidence of this happening in California.
- The MACPA and AICPA also voiced concerns about the lack of detail in the overtime rules’ so-called “duties test,” which determines which white-collar salaried workers are eligible for overtime pay.
The meeting with the OMB is the latest salvo in the MACPA’s opposition to the DOL’s proposed rule. The MACPA wrote its own letter in opposition to the rule, then joined the AICPA’s efforts in a bid to unify the profession’s opposition. In addition, the MACPA signed onto an opposition letter from the American Society of Association Executives and joined the U.S. Chamber of Commerce’s Partnership to Protect Workplace Opportunity, a coalition of “associations, businesses, and other stakeholders representing employers with millions of employees across the country in almost every industry,” which is working diligently to delay the DOL’s proposed rule until enough analysis has taken place to accurately project the impact of the rule.
The overall message is this: There are some good intentions in the DOL’s proposed rule … and an awful lot of unintended consequences. Let’s take a phased-in approach rather than trying to shove this entire rule down the business community’s throat at one time.
Whether the DOL and the OMB will listen remains to be seen.
Regardless, it’s the latest example of the MACPA protecting its members and the profession through coordinated legislative advocacy.
Read more about the MACPA’s legislative advocacy efforts, then learn more about the DOL’s proposed overtime rule:
- As new overtime rules near, businesses need to prepare (from Fox Business)
- DOL overtime rule changes: 8 key questions (from AccountingWEB)