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Minimum salary rule didn't have large impact on area pay scales

Rules governing overtime pay were changed a year ago, but not everyone who deserves a pay boost got one.

Two employers in Western New York were found to have paid workers less than their due under the new rules, according to records obtained from the U.S. Labor Department's Wage and Hour Division office in Buffalo.

The federal rules upped the minimum for salaried workers to $455 a week, from $250, among other changes. But the requirement wasn't met at a Holiday Inn in Amherst and at some area Ponderosa restaurants, where a total of 11 workers were underpaid by $3,715, according to Labor Department reports.

It's impossible to tell how many workers in the area are getting shortchanged, but it's probably more than the 11 found by the agency.

The minimum salary rule was expected to have a broad impact in retail and food service industries, where many assistant managers earn relatively low salaries.

Nationwide, 1.3 million low-salaried workers should have seen their pay go up under the new rules, the Labor Deparment has said. The new minimum and other overtime regulations went into effect Aug. 23, 2004.

However, many employers remain confused by the rules, experts said.

"Eighty or ninety percent of employers think 'If I pay you a salary, I don't have to pay you overtime,' " said Robert Miller, past president of the Niagara Frontier Chapter of the Society for Human Resource Management.

In fact, salaried jobs must have managerial responsibility, professional qualifications or meet other criteria to be exempt from overtime. Hourly workers receive the time-and-a-half overtime premium under the Fair Labor Standards Act.

Besides raising minimum salaries, the changes a year ago widened classifications for professional and managerial workers.

The changes touched off an uproar. Labor advocates said the new classifications would allow employers to cut off overtime for millions of workers. Employers called the changes a long-overdue clarification of arcane and complex rules.

A year later, employers say that few workers are seeing any change in pay.

According to a survey by the Society for Human Resource Management in Washington, D.C., less than 1 percent of employees became eligible for overtime under the rules. The number of jobs becoming ineligible for overtime -- that is, changing from hourly to salaried -- was also less than 1 percent. The results were based on 355 respondents from members of the nationwide group.

In Western New York, several major employers also said few workers are seeing changes in their paychecks.

At Wilson Farms stores, assistant managers earn hourly wages plus overtime, while managers get a salary above the minimum, human resources director Don Crimmen said.

Determining who qualifies as salaried "is probably the most complex issue we have to deal with in retail," he said. "We have a lot of stores where the assistant manager has a lot of responsibility."

HSBC Bank USA audited its 14,000 positions, including 5,000 in the region, and found only 15 that needed to be reclassified under the new rules, spokeswoman Kathleen Rizzo Young said. All 15 went from salaried to hourly, overtime-eligible jobs.

Adelphia Communications didn't have any classification switches, Buffalo-region manager Jeanne Coleman said. "The impact on us was negligible," she said.

But its unknown how many workers are getting less than their full pay because of errors by employers, as uncovered by some enforcement actions within the past year.

Records of the U.S. Labor Department's Wage and Hour Division, obtained under the Freedom of Information Act, cited the Holiday Inn on Niagara Falls Boulevard and Indus Foods in Pittsford, operator of 12 Ponderosa Steakhouse restaurants in Western New York and Northern Pennsylvania.

Indus paid nine manager-trainees a flat salary of less than $455 a week each, while raising full managers above the threshold, an investigator's report said. Workers in the trainee group did receive a bonus for working extra, but the sum didn't amount to full overtime, the report said. The underpayment totaled $2,500 in back wages, department records state, and the employer was charged a $1,980 penalty.

The restaurant chain cooperated with the department and made back payment to the workers, an official said.

At the Holiday Inn, two workers were paid less than the minimum salary for an underpayment of $1,215, the report said. Three other workers were found to have been underpaid for reasons unconnected with the new rules.

"I was under the impression we fixed everything -- everything is in order and no back compensation is due," said Mark Frantz, vice president of human resources at Hart Hotels in Buffalo, owner of the Holiday Inn. After a meeting with Labor Department representatives the hotel voluntarily changed some workers' pay to ensure compliance, he said. The investigator's report said back pay was made to the affected workers.

Changes in state law will give low-salaried workers a further boost over the next two years, as the minimum salary threshold rises to $536 a week in 2007, above the federal level.

At Hart Hotels, which has six properties in the area, some salaried workers earn less than the future minimum; chiefly those with little experience, Frantz said.

"We will have to make decisions whether to move (workers) to that new level or reclassify them as hourly," he said.

e-mail: fwilliams@buffnews.com

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