South Carolina likely to be especially affected by new federal rules on overtime pay

South Carolina likely to be especially affected by new federal rules on overtime pay

Charleston Post & Courier
May 21, 2016

By Thad Moore

Come December, Quince Cody plans to keep a closer eye on how long his employees are working, making sure they don’t crack 40 hours a week.

And when things get busy at the Ronald McDonald House Charities of Charleston — when workers would usually pull long hours — the organization plans to rely more heavily on volunteers, said Cody, its president and CEO.

Changes like those will be repeated across the country in December when new standards boosting the number of people eligible to earn overtime pay go into effect. They’re likely to be especially pronounced in South Carolina, where an especially high percentage of workers are thought to be covered by the updated rules.

The policy shift is intended to counter erosion in overtime protections, which date from the 1930s and require employers to pay 1 1/2 times a worker’s regular salary for any work past 40 hours a week.

In the fast food and retail industries in particular, many employees are deemed “managers” and work long hours but are barely paid more than the people they supervise.

The U.S. Department of Labor this week said it would roughly double the salary employers have to pay before workers aren’t eligible for overtime — the first such change in more than a decade.

Starting in December, people who make $47,476 or less will have to be paid time-and-a-half if they work more than 40 hours a week — regardless of if they’re paid a salary or by the hour.

The Labor Department says that means millions of people will start being paid overtime, get a raise or have their work weeks capped at 40 hours. Opponents, meantime, say they fear unintended consequences could outweigh the extra money workers could receive.

Whatever the outcome, the effects are expected to be especially big in South Carolina.

Salaries skew lower in the South, where the cost of living tends to be cheaper. And unlike places like New York and California, the Palmetto State hasn’t raised the cutoff salary on its own, said Patrick Wright, a University of South Carolina business professor who studies human resources.

“Certainly it’s going to impact South Carolina more than it’s going to impact other states,” Wright said. “When you look at the state of New York and the state of California, they’re barely going to be impacted by this because they basically already have this minimum at about the same rate.”

The Labor Department estimates that 67,000 workers in South Carolina will fall under the new rule, but a broader estimate by the left-leaning Economic Policy Institute found that 219,000 will be affected. That’s about 30 percent of employees who are paid a salary, the third-highest rate in the nation.

Business groups, unions, economists and politicians are now debating whether that’s a good thing.

The new rule drew sharp opposition from business groups like the S.C. Chamber of Commerce and U.S. Sen. Tim Scott, a South Carolina Republican and former Charleston insurance agency owner who serves on the Senate Committee on Health, Education Labor and Pensions.

Scott, who has proposed legislation to nix the regulations, wrote in a blog post Thursday that he feared unintended consequences from the move would hurt workers.

“A lot of folks will see their hours capped, some will see their salaries reduced, and unfortunately some folks will probably lose their job,” Scott wrote.

Labor advocates see more promising outcomes. Ross Eisenbrey, vice president of the Economic Policy Institute, said he doubted employers would cut worker pay or fire anyone because of the new overtime rules. Instead, he said he figures capping hours will force employers to hire more people, and a higher salary threshold might get some workers raises.

Frank Knapp Jr. figures the reality will likely be more subtle.

When the president and CEO of the S.C. Small Business Chamber of Commerce asked the members of his board what they made of new overtime rules last week, there was hardly a consensus, he said.

Some said they’d be OK with raising the salary threshold even higher. Others said they didn’t want an increase at all.

“Most small businesses are going to figure out how to respond that’s going to help them comply, and they’re still going to be profitable,” said Knapp, whose group hasn’t taken a position on the rules. “Whatever the actual response is to a new regulation, it’s much more muted, and the economy goes on.”

Associated Press contributed to this report.