Public warehouse industry to be hit hard by new federal overtime-pay rules, IWLA says

The public warehousing industry will be hit hard by federal government regulations requiring employers to grant overtime pay to salaried workers making less than $47,476 a year who work more than 40 hours per week, the International Warehouse Logistics Association (IWLA), its trade group, said yesterday.

The Department of Labor rule, which was published yesterday but won't take effect until Dec. 1, doubles the salary ceiling under which employers must pay overtime. The current level, which took effect in 2004, caps overtime eligibility to salaried workers making less than $23,600 a year.

The DOL formula is pegged to a percentile of earnings of full-time salaried workers in the lowest-wage census region, which is currently the South. The final rule also establishes a mechanism to automatically update salary and compensation levels every three years starting Jan. 1, 2020, DOL said.

In its first year, the rule is expected to make 4.2 million additional workers across multiple industries eligible for overtime pay, DOL said. IWLA did not have estimates on how many warehouse employees would become eligible.

Changes in overtime rules were enshrined in a 2014 White House memorandum directing the department to redefine what type of "white collar" workers should be protected by the minimum-wage and overtime provisions of the Fair Labor Standards Act (FLSA), the landmark 1938 law that introduced the forty-hour work week, established a national minimum wage, and guaranteed "time-and-a-half" pay for overtime in certain jobs. The new rule is seen as putting more money into the pockets of middle-class workers such as retail and restaurant managers who may work beyond 40 hours but in the views of the Administration aren't being compensated for it.

IWLA, whose members hire for a large number of entry-level jobs, said the regulations will raise costs, hurt job growth, and stifle efforts to achieve upward mobility, a characteristic the public warehousing segment is traditionally known for. "We are an industry that is built on opportunity for growth and career advancement," said Steve DeHaan, the group's president and CEO, in a statement. "Ask any member how they got their start in warehousing and most of them will tell you they started out sweeping the floors."

It will take some time for the economic impact of the new rule to be felt by warehouse owners and operators, IWLA said. However, the group warned that owners and managers would need to "brace themselves for big changes in order to maintain costs and stay in business." In an effort to offset higher costs, management may need to delay promotions or force managers to be paid hourly rather than through weekly, biweekly, or monthly payouts, the group warned.