How Will the New Overtime Law Affect Construction Pros?
After a winding saga through two presidential administrations and a district court in Texas, the Department of Labor’s overtime rule is finalized. It takes effect on Jan. 1, 2020.
Under the new overtime rule, a clarification of the 1938 Fair Labor Standards Act (FLSA), most salaried workers who earn less than about $35,500 per year will be eligible for time-and-a-half overtime pay, up from the current threshold of about $23,700. The change expands overtime eligibility to up to 1.3 million workers. According to Heidi Shierholz, senior economist at the Economic Policy Institute in Washington D.C., the new rule gives workers $300 million to $600 million per year in wage increases over the next decade.
What does this mean for the construction industry? In short …
- Most construction businesses are subject to the new rule. According to the law, a business in the construction industry must have two or more employees and have an annual gross sales volume of $500,000 or more.
- Hourly construction laborers will not notice any difference. According to the U.S. Wage and Hour Division (WHD), overtime protection is still in place for police officers, firefighters, paramedics, nurses and laborers including: non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen and construction workers.
- Workers in California and New York will not notice any difference. Those states have higher-salary thresholds, which override the FLSA.
- Salaried workers, especially in lower-paying states, may get overtime pay for the first time. People who work more than 40 hours per week and make less than $35,500 are now eligible for time-and-a-half overtime pay.A few more things to keep in mind:
- Some construction employers have attempted to skirt overtime law by spreading workers across two or more jobsites during a workweek and then counting overtime as more than 40 hours at a single location. This is illegal. Under the law, overtime is counted as hours worked for the same employer per week, not per location.
- Some construction employers have attempted to skirt overtime by claiming that overtime is incurred by the pay period, instead of by the workweek. This is illegal. Working fewer than 40 hours in one week of a pay period does not offset overtime incurred during the other weeks.
- Under the FLSA, “any employer” that violates minimum wage or unpaid overtime compensation laws may be liable for both the shortfall and liquidated damages, which means double the damages. In some cases, employers have even been jailed.
Although the overtime law does extend overtime protection to some workers, labor advocates are largely crestfallen by the new rule because of what might have been. Under a previous version of the rule, proposed in 2015, 780,000 construction workers would have received overtime pay, or 32 percent of the industry’s salaried workers. But the vast majority of those workers, some 500,000, are now no longer eligible.
The 2015 rule was vehemently opposed by trade groups including the Associated Builders and Contractors and the National Association of Home Builders. These groups, plus several states, filed a lawsuit against the Department of Labor in 2016. Then in August 2017, a Texas district court judge suspended the rule. Rather than appeal to the Supreme Court, the Trump administration proposed a new standard with a much-lower salary threshold.