Labor

Proposed overtime rules will result in lost wages and benefits

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The Maine Legislature next session will consider another bill that would be harmful to Maine’s small business community and employers across the state. Instead of killing the bill, LD 402, in committee, lawmakers carried it over for further debate despite significant opposition.

According to testimony presented at the public hearing, every representative of a small business present testified in opposition to the bill. In contrast, only union representatives and liberal special interest groups, such as the Maine People’s Alliance, supported the bill. 

LD 402 would annually raise the minimum salary an employee who works in an executive, administrative or professional capacity must earn in order for the employee to be exempt from minimum wage and overtime pay laws in Maine. The current minimum amount an employee can legally earn without receiving overtime compensation is $33,000 and is slated to increase to $36,000 in 2020. 

LD 402 would increase the amount to $55,224 by 2022 and the rate would be increased annually based on wage data and statistics from the United States Department of Labor. Small businesses in Maine are already burdened with minimum wage increases that were passed in 2016 and will take further damage by the new requirement for employers to pay for an employee’s sick leave. A 53 percent increase to the amount an employer would need to pay a salaried employee to avoid paying the overtime rate would only exacerbate costs for small businesses. 

If the bill passes, employers would need to do one of the following if their employees work more than 40 hours per week: Increase their employees’ earnings to at least $55,224 by 2022, pay their employees a substantial amount in overtime or cut the number of hours their employees work. While all of these scenarios would likely hurt business owners’ bottom line, cutting hours or converting em;loyees to an hourly rate would hurt working Mainers as well. 

According to Craig Burgess, a general manager at Marden’s Surplus and Salvage, the chain would have to convert their salaried employees to hourly workers, which would result in a “reduction of benefits as well as workplace flexibility that they now enjoy” as salaried employees. Several other business owners from across Maine echoed the same sentiment.LD 402 comes with unintended consequences that would ultimately harm the employees it seeks to help. 

This bill would further encroach on the employer-employee relationship. An employer who currently pays an employee $40,000 for 50 hours worth of work per week is exempt from paying overtime. However, if this bill passes and no other changes are made, the employer would be required to pay the same employee $55,000 annually, including overtime, by 2022. Additional costs of this magnitude would require small and medium-sized businesses to make difficult financial decisions in the future. There is a reason no other state has adopted overtime exemptions as extreme as this proposal. 

Unfortunately, these concerns were lost in the bill sponsor’s testimony. Representative Ryan Tipping offered to introduce an amendment that would appropriate state funds to alleviate the “financial pressure” this bill would create on both the University and Community College systems’ budgets but does not mention the impact it would have on the private sector. As previously noted, the negative consequences of this bill would surely have a wider impact than state-funded college systems in Maine. 

Instead of attempting to expand the number of workers who are eligible for overtime pay, the legislature should identify a means of reducing the tax burden on Maine workers, preferably the income tax. A reduction in the state tax burden would be a win-win for both businesses and individual employees who want to earn and keep more of their hard-earned money.

About Adam Crepeau

Adam Crepeau serves as a policy analyst at The Maine Heritage Policy Center. He can be reached at acrepeau@mainepolicy.org.

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