Question

Many companies deal with aggregate scheduling by forcing overtime on their employees to adjust for the peaks of seasonal demand. For example, a recent The Wall Street Journal report on long and irregular hours in the U.S. highlights Angie Clark, a J.C. Penney supervisor in Springfield, Virginia. Clark works at least 44 hours a week, including evenings and frequent weekend shifts. Because of recent economic changes, staffers are busier than 5 years earlier, when Clark had 38 salespeople instead of the current 28. The result of this pressure is a 40% turnover. Because employee turnover is so large, training consists of the bare minimum - mostly how to operate the cash registers. Discuss the implications of a strategy of heavy use of overtime in retailing, as well as in other fields, such as manufacturing, hospitals, and airlines. How does this U.S. approach compare to that in other countries?

Answer 1

Implications of overtime on retail and restaurants:

A new report from the National Retail Federation shows that the majority of retail managers — who are among those which will be most directly affected by the Department of Labor’s proposed rulemaking aimed at forcing certain managers from salaried career positions into jobs paid on an hourly basis — overwhelmingly disapprove of these efforts. Retail managers say the proposed changes to the federal Fair Labor Standards Act regulations show the Department greatly misunderstands their roles in the workplace and would effectively strip retail managers of their salaried status, generating negative consequences for the entire industry. Key findings from the report:

Changes Will Have Negative Impact on Morale, Customer Experience

Retail managers overwhelmingly disapprove of the proposed regulations, arguing that it could have negative implications for managers, employees and their customers.

75 percent of respondents said the changes would diminish the effectiveness of training and hinder managers’ ability to lead by example.

Roughly two-thirds predicted employee morale would decrease.

Roughly eight in ten (81%) respondents said that customers would be negatively affected if managers were excluded from performing non-managerial tasks.

Changes Will Undermine Managers’ Career Stability, Personal Satisfaction

In fact, roughly 85 percent of respondents felt that if they were transitioned from salaried to hourly pay the change would have negative consequences on managers themselves.

Nearly half (45%) of respondents said the changes would make them feel as though they are performing a job instead of pursuing a career.

Under the new regulations, 41 percent of managers believe they would be paid less since hourly employees are not eligible for bonuses.

Managers Wear Multiple Hats: Non-Managerial Tasks Important Part of Position

Retail and restaurant managers already see themselves dedicating the majority of their time (66%) to managerial tasks without any federal intervention. The vast majority of managers report that some of their daily tasks overlap with those of hourly employees — and they see this as essential to serving in their capacity as a manager to staff, customers and themselves.

Roughly 66 percent of managers’ time is spent managing employees.

Additionally, 50 percent of retail and restaurant managers’ time is devoted to customer service.

Given this reality, managers fear that any changes made to the “duties test” portion of the executive exemption could impact the entire industry.

Changes Will Further Eliminate Middle Class Management Positions

Retail is a true meritocracy — providing countless opportunities and pathways to move from an entry-level job to management. Retail and restaurant managers have a unique understanding of their business, which is rooted in hands-on industry experience. Over nine in ten retail and restaurant managers value personal satisfaction (95%) and career stability (94%) in their professional lives most highly.

Two-thirds of retail and restaurant managers (67%) say that when charting their career path, the phrase, “I moved up the ranks in the retail/restaurant industry first (for example, as a store associate/server/drive-thru employee,” describes them completely.

A majority (52%) reports that an inherent desire to work with people — not paper — motivated them to become a retail or restaurant manager.

Impact of overtime on Manufacturing/Automoative industry

According to Bryance Metheny, a Birmingham, Ala., labor attorney, the new overtime law will have less impact on the manufacturing/Automations industry, which requires more skilled workers and tend to pay higher wages, than on industries like restaurant and retail where supervisors often make in the high 20s or low 30s.

Metheny represents automotive suppliers in his practice, as well as Mercedes, Honda, and Hyundai. For the OEMs, “this is really not that big a deal,” he says. “Even their hourly employees make more than $50,000 a year.”

The auto suppliers, however, should feel the change more, especially for their front-line supervisors who are salaried. “They’re either going to have to move them to hourly plus overtime or raise their comp level to get them to exempt status,” he says.

He thinks that most will choose to raise front-line supervisors’ salary to the $50K threshold to keep them exempt from overtime. “There’s such a big advantage to an employer to have those positions as exempt, because if the machine goes down and chaos ensues and it takes a lot of time to put it back together, they don’t have to worry about how much overtime they’re going to have to pay.”

Metheny says that having more hourly employees and fewer salaried ones could actually lead to more hiring in certain industries, but in manufacturing, “I see it as a little bit more complicated. Most of the time we’re talking about positions that require a certain skill level and the training that goes into it, the investment that you have to make in these employees is a little bit higher.

“A manufacturer will just have to answer for themselves—‘Would I rather have more trained personnel, or would I rather just have to pay overtime every once in a while? Which is going to be most cost-effective for my business?’ They’re going to have to look at that on a case-by-case basis."