By Dave Vieser. Beginning in December, 4 million more American workers will qualify for overtime pay under new regulations issued by the U.S. Department of Labor. Under the new rules, overtime will be paid to many more workers, including those on salary. How this will impact local businesses, especially smaller firms, is still anyone’s guess.

“The new overtime regulation will certainly provide a short-term boost for middle-class workers who haven’t enjoyed meaningful wage growth over the past decade,” said Ryan McDevitt, an assistant professor of economics at Duke University’s Fuqua School of Business.

On the other hand, the rules may be a tough pill to swallow for business owners. “Government intervention is rarely a good thing,” noted Bill Russell, president of the Lake Norman Chamber of Commerce. “It’s good for the employee short term and not so much for the businesses.”

The law of unintended consequences could come into play. Indeed, the former CEO of McDonald’s, Ed Rensi, said a $15 minimum wage could convert fast food jobs into robots. “If you look at the robotic devices that are coming into the restaurant industry, it’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging French fries.” Could something similar happen if the floor for overtime for salaried workers rises to $47,476 a year?

In 2004, rules regarding executive and managerial jobs were loosened, resulting in many more employees, such as supervisors, becoming ineligible for overtime. Many companies then gave the workers supervisor titles, especially in fast food and retail jobs, where employees then worked more than 40 hours a week without additional pay.

The new regulations were designed to address this, increasing the minimum salary at which a full-time salaried worker can be exempt from overtime rules from $23,660 to $47,476 annually, or from $455 to $913 weekly. The new regulations also include an inflation adjustment every three years.

In announcing the new regulations, Vice President Joe Biden said, “We can’t allow folks with families to support to work long hours without being paid fairly for it.” The Obama Administration expects the change will result in either higher pay or more time off for up to 4.2 million workers who currently are not eligible for overtime under federal law. So, it becomes not just a salary but also a quality of life issue, since some companies are expected to give workers more time off rather than paying overtime.

“Revenues remain constant yet the cost of operation goes up requiring either a price hike to the consumer or less profit for the business. To remain competitive, management is usually faced with the prospect of cutting back hours to the employee or finding ways to automate and cut out the human element altogether.”

– Bill Russell, Lake Norman Chamber of Commerce

But it’s not all that simple, said McDevitt. “Many businesses will experience a hit to their productivity from these new rules, as they now have to pay more for the same amount of work.”

Russell agrees. “Revenues remain constant yet the cost of operation goes up requiring either a price hike to the consumer or less profit for the business. To remain competitive, management is usually faced with the prospect of cutting back hours to the employee or finding ways to automate and cut out the human element altogether.”

Virtually all local businesses contacted by Business Today have adopted a wait and see attitude. “It doesn’t go into effect until December and I expect we’ll be hearing a great deal about from our corporate office between now and then” said a Lake Norman retail business manager who wished to remain anonymous since he was not authorized to speak on the subject.

Robin Salzman, co-owner of Lake Norman Chrysler Jeep Dodge, said most of the dealership’s employees are “already on hourly wages and being paid overtime so we will have minimal changes.”

Ironically, the biggest effect of the new law may be that it hurts lower-salaried workers. “I foresee younger, less-skilled workers faring the worst under this plan, because they often compensate for their lack of training by working longer hours to get the job done,” McDevitt said. “Now that kind of on-the-job training will be too costly for businesses.”