Flooring dealers unfazed by shelved federal OT rule

Home Inside FCNews Flooring dealers unfazed by shelved federal OT rule

January 16/23, 2017: Volume 31, Number 16

By Ken Ryan


Flooring retailers have had their fill of regulator issues to deal with in recent years, from The Affordable Care Act to minimum wage hikes and the Department of Labor’s (DOL) new interpretation of what constitutes an employee vs. an independent contractor.

So when a federal judge in Texas granted a temporary injunction on the much-maligned federal overtime (OT) bill that was set to take effect Dec. 1, 2016, many dealers breathed a sigh of relief even though the measure, if enacted, was less onerous than other regulatory issues.

The overtime rule would have raised the salary threshold from $23,660 to $47,476 and provided for triennial adjustments based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region. The National Retail Federation had called the OT rule a “career killer.” Small businesses hated it. Unlike other labor laws that don’t include small businesses, this change wasn’t dependent on company size, meaning every business could get hit.

Twenty-one states had filed an emergency motion for a preliminary injunction in October to halt the rule, claiming the DOL exceeded its authority by raising the salary threshold too high and providing for automatic adjustments to the threshold every three years.

The states’ case was consolidated in October with another lawsuit filed by the U.S. Chamber of Commerce and other business groups, which raised similar objections to the rule.

In his ruling, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas, wrote: “[The DOL] has admitted that it cannot create an evaluation ‘based on salary alone.’ However, this significant increase to the salary level creates essentially a de facto salary-only test. If Congress intended the salary requirement to supplant the duties test, then Congress—and not the department—should make that change.”

Most flooring dealers contacted by FCNews did not view the OT law as an urgent threat, especially not at the same level as the independent contractor vs. employee misclassification imbroglio.

Some flooring dealers made no adjustments at all in the weeks leading up to Dec. 1. Sam Roberts, owner of Roberts Carpet & Fine Floors, with multiple locations in the Houston market, said there would have been very little, if any, impact on his business, explaining that only top management typically works more than 40 hours a week at Roberts. He’s also not worried about the future. “In the event those OT laws are instituted, we would only need to be careful with documentation to protect ourselves from unfounded accusations,” he said. “I think the coast is clear for those with concerns for at least the next four years. Even if the Democrats take back the Senate in 2018—which I think is highly unlikely—Trump would veto any bill that included this sort of regulation. There is no way the Dems will be able to override a veto.”

Bill Zeigler, co-owner of Charles F. Zeigler & Sons, Hanover, Pa., said the proposed OT law, if enacted, probably wouldn’t affect his company because the majority of his employees are paid hourly and those who are paid salary are over the current minimum.

Likewise, Greg Miller, owner of Henry’s Floor Covering, Greencastle, Pa., said his employees are paid hourly plus commission. “I pay overtime on any hours after 40 hours in a weekly pay period. The new overtime laws shouldn’t cause us to make many changes, if any, to the way we pay employees.”

For America’s Carpet Outlet in State College, Pa., the impact would also have been minimal. “We do have one person who would fall into the pay range so it [would] probably cost us a little more, but [we’d] probably just eat the cost,” said George McMurtry, owner.

In the run-up to the Dec. 1 implementation date, flooring dealers spent extra time educating their employees about the changes. America’s Carpet Outlet posted the new laws in two different locations in its store and each employee received a copy of the proposed new rules.

A.J. Boyajian, co-owner of A.J. Rose Carpets & Flooring, Burlington, Mass., said the three-store operation worked with an HR consultant to ensure compliance. “As well, we had to make sure we knew how the potential new rule would affect future hiring, etc. We luckily didn’t have any employees that would have been affected by the law.”

At Henry’s Floor Covering, Miller gave all employees information on the Final Rule so they were aware of the changes; he also closely monitors employees’ hours and overtime on a weekly basis. “Whenever I see we are in a situation where employees are working extended hours, I will hire more sale associates,” he said. “That would be a great problem to have—having too much business for my current staff to handle.”

The DOL will likely challenge the OT decision. In a statement, it wrote, “We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”

Of greater concern to flooring dealers is the DOL’s enforcement of the classification issue regarding subcontractors vs. employees. “That is the only really scary thing on the horizon,” Roberts said. “That has the potential to be nightmarish. That said, if enforcement is universally applied, which is not an assumption I am comfortable with, I don’t think it will be that big a deal. Many of us will have to change the way we are doing things, but we shouldn’t be competitively disadvantaged.”

Lindsay Baillie contributed to this story.

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