The 40-hour workweek is so ingrained in our society that it is hard to remember a time when it wasn’t the standard. First introduced by Henry Ford in 1926, the 40-hour workweek became law in 1940 through an amendment to the Fair Labor Standards Act (FLSA). Overtime pay was also established at that time with a rate of 1.5 times the regular rate of pay for a workweek after 40 hours.
For 82 years now this standard has guided the work-life balance both for employers and employees. But now the workweek many businesses rely on is under fire. While many businesses have reimagined their operations during Covid lockdowns, federal law may just change to require it in a way that does not best serve them. A recently introduced federal bill intends to reduce the workweek from 40 hours to 32. And that would mean employers would be on the hook to pay an overtime rate of 1.5 times the regular rate per hour for 33 hours or more in a workweek.
As an employer myself, I know first-hand the importance of valuing employees and compensating them accordingly. However, there is a high risk that this 32-hour work week proposal could mean businesses find themselves cutting hours (and pay) to avoid paying overtime and to stay profitable enough to make payroll.
H.R. 4728 (THIRTY-TWO-HOUR WORK WEEK ACT): A COSTLY LAW FOR EMPLOYERS & EMPLOYEES
Could we be looking at the start of a 4-day work week? California Rep. Mark Takano (a California Democrat representing the 41st District) introduced this bill in the US House of Representatives on July 27th of 2021. He argues that a shorter workweek would be of benefit to both employees AND employers. Claiming that workers have seen soaring hours and stagnant pay, Takano reasoned that fewer hours would equal better wages, stating in a press release:
“After the COVID-19 pandemic left so many millions of Americans unemployed or underemployed, a shorter workweek will allow more people to participate in the labor market at better wages.”
Takano further cited pilot programs worldwide. He predicts a reduction in healthcare premiums and lower operational costs for businesses. He also stated there will be a positive environmental impact and fewer sick days. While in theory, those benefits sound appealing, it is missing a major consideration — cost.
For instance, employers would immediately have to absorb the cost of paying eight hours of overtime simply to keep the status quo. Many employers are already struggling to pay their bills and even some of the biggest chains are finding themselves with empty shelves and closing their stores early in the middle of supply chain and labor shortages.
Instead of raising pay for employees, employers would be forced to cut hours. This would reduce employees’ pay, and subsequently — productivity. Employers simply are not going to pay a premium with LESS production to show for it. That’s the way the issue is seen by Dan Hamermesh, a professor of economics at the University of Texas at Austin, in a recent article on the subject.
To be advantageous, there should be a host of options for employers to develop their work schedules, according to Hamermesh. As he sees it, there are a number of benefits for using a tailored approach rather than a sweeping legislative change
“To me, this is about increasing the menu of choices for workers, since I’m quite sure there are people on both sides of the fence,” Hamermesh said. “But to have it apply mandatorily across the whole economy? I think a lot of people would be worse off that way.”
The bill was just introduced last year. It was referred to the Committee on Education and Labor, where it has so far remained without action. Further, there does not seem to be organized opposition to it. Nevertheless, precedence for the outcomes of such a law may be found in the Affordable Care Act (“Obama Care”), according to an opposing point cited in a recent article. The article states:
“The law required employers to provide health insurance for employees who worked 30 hours per week. After it went into effect, the percentage of employees who worked 31 to 34 hours per week — just over the threshold — declined, while the percentage who worked 25 to 29 hours per week — just under the threshold — increased.”
With so much at stake for employers, the time to proactively safeguard your business is now.
STAY ON TOP OF POLICIES: THE WAVE OF RECENT WAGE-RELATED LAWS TO ACCOUNT FOR NOW
The past year or so has seen many changes to labor and employment laws, many of which reinforced and updated overtime and other payment-related requirements, including:
- Wage Theft Law Updates. As covered in a recent blog on the subject, Assembly Bill 1003 greatly strengthened the state’s wage theft law. The legislation made intentional theft of wages in an amount greater than $950 from any one employee in a 12-month period punishable as grand theft. Potential violations included minimum wage violations; overtime violations; off-the-clock violations; meal and rest break violations, late/ no pay violations, and illegal deduction violations. For more information, read the blog post.
- Overtime Pay Increase in Agriculture. As previously addressed, AB 1066 established a new set of guidelines for California overtime laws for agricultural workers. Starting on January 1, 2022, the phased schedule for changes to daily and weekly hours for overtime pay started applying to those with 26 or fewer employees. The California Department of Industrial Relations outlines the requirements for agriculture overtime pay here or you can view the chart in our recent blog post on the subject.
- Increased Successor Liability. Assembly Bill 3075 is intended to help employees collect wages from successor businesses by increasing the liabilities of successor businesses, reading in part: “A successor to a judgment debtor shall be liable for any wages, damages, and penalties owed to any of the judgment debtor’s former workforce pursuant to a final judgment, after the time to appeal therefrom has expired and for which no appeal therefrom is pending.” For more information, read this blog post.
While it can be challenging to stay up to date on new laws, staying in compliance is much easier than facing litigation later for non-compliance. A very effective way of staying in compliance is by reviewing and revising all written policies, handbooks, employment agreements, and confidentiality agreements to be in conformity with the law.
Proper Defense Civil Division Founder Justin Vecchiarelli focuses his practice on employment and labor law. His extensive experience has helped businesses of all sizes make sure they are in compliance with all wage and related employment laws (and continue to stay in compliance). At Proper Defense, we are uniquely qualified to help businesses navigate the continuously updated requirements of state and federal employment law.
PROPER DEFENSE PROVIDES PROACTIVE COUNSEL TO REDUCE CLIENT EXPOSURE
Running a profitable business while staying in compliance is no simple feat. Now more than ever, it is paramount to have sound legal advice BEFORE litigation. We don’t believe in only providing representation when a lawsuit is filed.
For a true advocate that you can trust, in a judgment-free zone, contact Proper Defense Law Corporation today. For a FREE consultation in the Fresno area, call (559) 825-3800. You can reach us at our Beverly Hills location by calling (424) 284-4066. You can also schedule an appointment online on our Contact Us page. It gets better with Proper Defense, we promise
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