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How will the new overtime laws affect interns and recent grads? A variety of experts weigh in on this hot topic.
Changes to overtime laws
The Department of Labor expects the new overtime laws to affect 4.2 million workers – many of whom are likely new college grads out on their first “real” job. As of December 1, 2016, the days of working 50+ hours a week and earning $35,000 should be gone, says Kate Bischoff, a human resources professional and employment/labor law attorney with the Minneapolis office of Zelle LLP, an international litigation and dispute resolution law firm. Bischoff is co-leading a June 2, 2016, webinar titled Preparing for Changes to FLSA Overtime Regulations, discussing this topic and more.
Salary versus hourly
There’s one thing college graduates should keep in mind, says Bischoff, and that is that salary has nothing to do with status.
“Being paid a salary doesn’t mean that an employee is more valuable to his or her employer than an hourly employee,” says Bischoff. “It is simply a different way of paying people for their work.”
Those who are nonexempt – those eligible for overtime – may earn time and a half when they work long hours and may even earn more than their salaried brethren, points out Bischoff. Those who are exempt and earn more than $913 a week will not be compensated for their long hours in the office in the form of hourly payments. In fact, when some employees shift from salaried to hourly, many times, they earn more as an hourly employee.
The other thing about being paid on an hourly basis is that employers need to know how much you work, says Bischoff. With apps on smartphones and smart watches, employees can now track their time easier than ever before. “If you track your steps, you can track your hours,” says Bischoff. “The fact that you have to punch in or clock out only means you need to capture your time to get paid the value of your work. That’s all.”
Ask questions to clarify status
So what should college grads do and consider before accepting a job, or if they have questions about their current and future employment status at their existing job? Ask questions such as these, says Bischoff:
- What will their overtime status be?
- Will this position be eligible for overtime?
- Will I be paid a salary?
“For many college grads, work-life balance is important, so ask if you will be able to make it to your volunteer activity every Thursday evening,” says Bischoff. “While asking if you will ‘have to’ work overtime may be a signal to an employer that you might not be a dedicated employee, you can ask about particular events or activities important to you. You may glean from the answer the amount of hours you will put in.”
What do the new overtime laws mean for interns?
Currently, the vast majority of interns earn less than the $23,660 DOL threshold and therefore are classified as non-exempt and qualify for overtime. When the new rules take effect on December 1, 2016, the threshold will almost double to $50,440. The number of interns who earn between $23,660 and $50,440 is miniscule and, therefore, the law will directly impact virtually no interns, says Steven Rothberg, founder of College Recruiter. That said, there could be a substantial impact on new grad hiring as virtually all new grads earn more than $23,660, the average is about $46,000, and a substantial minority earn more than the $50,440.
“At College Recruiter, we believe that the law will have a substantial impact on the number of hours worked by management trainees and other such workers who have traditionally been paid as exempt, salaried employees with no ability to earn overtime pay yet who routinely work far more than the standard 40-hour work week,” says Rothberg. “Employers will likely instruct these employees not to work more than 40-hours per week, which will effectively increase the compensation paid to and reduce the return on investment generated from these employees. Yet with a tightening labor market, more Baby Boomers retiring, and fewer Millennials graduating, it is unlikely that there will be any noticeable change in the number of recent grads finding employment within their chosen career paths.”
Manufacturing director: New OT laws could hurt interns and recent grads
John Johnston is Director of Manufacturing at States Manufacturing, a Minneapolis-based custom electrical and precision fabricated metal company with 49 employees.
He fears the new overtime laws will hurt interns and new hires, namely those graduating from college or technical schools.
“I would expect the starting wage to decrease to compensate for the change in overtime rules,” says Johnston. “Also, I would tend to expect the opportunities to reduce as well as the patience of employers. If we are going to pay more, we are going to raise our expectations and be less patient with someone because of the wage they are earning. When we have had lower wage earners at the start of their career, we are able to be more patient in part because the issues are not as magnified with a lesser wage. Once that increases, we have no choice but to be tougher that much quicker.”
Johnston said his company may avoid hiring interns in the future due to the increased costs and instead balance it with multiple part-time employees. The company currently does not have any interns, partly because they were sorting out the details of the new labor and overtime laws.
“I see this as a trend to save on escalating costs since benefits would not be required with part-time employees,” says Johnston.
A ripple effect for college grads
Elliot D. Lasson, Ph.D., SPHR, SHRM-SCP, is an adjunct professor at the University of Maryland, Baltimore County in Rockville, Maryland and a Human Capital Consultant with Lasson Talent Solutions. Lasson regularly presents to students on behalf of college career centers.
According to Lasson, the new overtime regulations will have ripple affects all around.
“Students who are in college or right out of college want to gain meaningful experience,” he said. “They are not paying all that money to be flipping burgers or driving for Uber after graduation. The conventional wisdom is that internships are valuable. And they objectively are. However, many employers misappropriate that label to justify in order to get free labor from students who feel desperate for that experience. In many cases, internships play out in a way where the students are gaining only minimal exposure to the workplace and field, while at the same time are not getting paid.”
The Department of Labor previously identified six conditions that must be met in order to permit unpaid internship scenarios. “Many employers play fast and loose with these under the pretense that the work environment itself is more important than it objectively is,” says Lasson. And now, this extends to graduate school as well. The grad students are still “students” and therefore unlike their undergraduate peers who are not in graduate school can still “qualify” to be unpaid interns while in graduate school. So, there is additional abuse of the system here as well, says Lasson.
“With the popularity of unpaid internships, many employers are inundated with requests and may just take advantage of students without having a handle on the DOL guidelines,” says Lasson.
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