Archive for the 'Government' Category

New DOL overtime rules: One good outcome and seven bad ones

Do you have employees who are on salary? Do those employees ever work more than 40 hours in a week, for whatever reason? If the answer is yes to these questions, your world is about to get more complicated and probably more expensive.

Please stay with me. I need to get into the weeds, but just for a minute.

The current Department of Labor (DOL) overtime exemption threshold for “white collar” employees is anyone with a salary of at least $23,666 annually, or $455 per week. Exempt means the employer is not required to pay overtime if and when this class of employee works over 40 hours per week. This threshold applies to all businesses, regardless of size or number of employees.

Here’s the news: The DOL has announced that as of December 1, 2016, that overtime exemption threshold will essentially double, to $47,476 annually, or $913 per week. So anyone currently receiving a salary of less than this new amount will soon convert to non-exempt status, and must be paid overtime when they work more than 40 hours a week.

The reason I’m concerned about this change is because of the size of the increase. I feared this new threshold is going to catch and hurt a lot of unaware small businesses in its net. So I took this concern to my small business audience in our online poll recently and asked if they knew about the new overtime exemption changes. Alas, with less than three months before taking effect, my concerns were justified: Almost three-fourths of our respondents said they either didn’t know about the change or how it would impact them, or they knew about it and it was going to be detrimental to them. The rest, just over a fourth, said they either had determined the change would not affect them or they were prepared.

Here’s the good outcome: You might be surprised to hear me say that I think a new threshold is not unfair. In 2016, a weekly salary of $455 is too low to be expected to work overtime without additional compensation, unless it comes with a leveraged compensation factor that allows them to earn more if they work more.

But while an increase in the overtime exemption threshold is not unreasonable, doubling the threshold all at once is. And like so many government creations, the devil’s in the details. And this devil will create more problems for both employees and employers than it will solve. For example:

1. Increased recordkeeping burden: Because the doubling of the overtime exemption threshold will significantly increase the number of salaried non-exempt employees in Main Street jobs, small businesses will be burdened disproportionately with additional time and attendance record-keeping.

2. Increased payroll expense: For small businesses in a lower cost-of-living area, an immediate doubling of the exemption threshold will create an employee re-classification burden that by definition will result in increased payroll expense, perhaps prohibitively.

3. Flexibility becomes expensive: If an employer requests of a non-exempt salaried employee to work over one week and take off those hours the next, or that employee makes the same request of the employer, under the new rules, that goodwill gesture will cost the employer overtime for the week with the extra hours. A good deed should not be punished.

4. Employee hours cut: Businesses in certain industries will respond by splitting a previous 50 hour/week job into two 25 hour/week jobs in order to prevent their payroll from increasing, hurting the original employee.

5. Bad news for managers: I’m already aware of companies that will react to the new threshold by laying off some managers while increasing the responsibility of a smaller number of exempt managers, without increasing their compensation.

6. A morale downer: Being put “on salary” has been considered a professional accomplishment by generations of employees. But HR professionals tell me they’re recommending converting any employees with salaries remaining below the new threshold to hourly status. There are millions of Main Street employees whose weekly income falls between $455 and $913.

7. More lawsuits: Because of the steps some businesses will have to take to prevent these new government-imposed costs from getting out of hand, experts I’ve talked with are predicting an increase in Fair Labor Standards Act lawsuits.

When the federal government does things like doubling the overtime exemption threshold in one fell swoop, it hurts Main Street businesses disproportionately. In this case, it will create a new administrative burden, increase payroll expense without adding a penny of new productivity, and possibly hurt morale.

For four years, polls show small businesses reporting that the mandates of Obamacare disproportionately hurt them. Within a year, small businesses will regard the new DOL overtime exemption threshold increase as the little brother of Obamacare. Another example of the ham-fisted regulatory overreach of the federal government that hurts the job creators and suppresses the economy.

Write this on a rock … Buckle up, small businesses. If you like your current payroll structure, you won’t be able to keep it.

What you should know about the Internet before we give away ICANN

Allow me to tell you a story of innovation bordering on the miraculous, scientific stewardship driven by professionalism and shared values, and global leadership that qualifies as agape. And the possibility that all three could be headed for an intersection where the best intentions of good people could be in jeopardy.

Approximately 23 years ago you and I were given access to the Internet, an invention that a generation earlier would have been considered science fiction. Most experts define the headwaters of this seminal invention to be the digital protocol work of Bob Kahn and Vint Cert, both researchers for a division of the U. S. government. Subsequent to its commercialization, these two and a few other geniuses created a number of digital innovations that enabled the Internet and established it as an unprecedented resource.

First question: How did the rest of the world get the Internet?

Since it was initially considered part of national defense, all of this mad scientist stuff was funded by the government’s National Science Foundation and its various contractors. As it became evident that the Internet had commercial applications, the U.S. began sharing with the world what we knew and what we had. Nothing was withheld, enabling the Internet to rise in every corner of the world.

Second question: Who operates the Internet?

Think of it like a private toll road system. The U.S. government allowed private investment to create interconnected computer networks into a “backbone” system that, for a “toll,” delivers our digital business around the world using the protocols created by Kahn and Cerf, and later applications like browsers. Similarly, more private investment built out the infrastructure to transfer digital info from the backbone to last-mile users, like you and me, at the speed of light.

Third question: Who’s in charge of Internet governance?

Who runs the Internet is more complicated to explain, but it’s important because of that intersection thing mentioned earlier. In fact, the U.S. government allowed Kahn, Cerf and others to create governing bodies like the Internet Society, the Internet Engineering Task Force, the Internet Architectural Board, and the World Wide Web Consortium, as organizations overseeing governance, access and standards for the global proliferation of the Internet. The Internet Society, which is the incorporated parent of two of these organizations, has 80,000 stakeholders and 110 chapters in 140 countries. That’s a lot of shared governance with one goal – a free and open Internet, sans politics.

The reason I’m telling you about the origin and governance of the Internet, is because a very important, last piece of U.S. direct influence of an Internet possession is about to be lost. The 18-year contract between the U.S. government and the Internet Corporation for Assigned Names and Numbers (ICANN) expires on September 30, 2016. When you create a new website it actually has two addresses: 1) a name, like abcsupply.com, for humans to remember and manage; and 2) a number value, like 207.111.167.145, for the way computers work. If you type either the words or numbers assigned to your website into a browser, the same page will be delivered.

According to NetChoice.org Executive Director, Steve DelBianco, in 2014 the Obama administration instructed ICANN to create, and transfer itself to, a “global, multi-stakeholder community.” On my radio program recently, DelBianco reported that this new body has been created and will take over on October 1. As part of the transitioning team, he says the new ICANN will be not unlike the other bodies mentioned earlier who’ve been governing the Internet for decades. That’s the good news.

Last question: If the Internet had been the property of Russia, China, or even France, would access and control of such a powerful resource have been so freely shared?

I think not. Consequently, in spite of my confidence in DelBianco and his colleagues, I’ve been very outspoken in the past three years against this plan for ICANN. I’m concerned about the loss of the last thread of direct influence by the U.S. government. I’m worried about what will happen if when we reach that intersection in the future, global, multi-stakeholder organizations, who’ve governed so dispassionately – without ideology – for decades, somehow become influenced or overridden by bad actor states, or possibly worse, the United Nations. The UN has a long history of coveting control of the Internet.

The United States is the most benevolent broker on the planet and has never let geopolitics influence Internet access or governance. With so many experts projecting that cyber-attacks pose a more imminent threat to our sovereignty than nuclear weapons, I fear the best intentioned Internet governors and investors may ultimately be no match for someone named Putin, Jinping, Khamenei, Jong-un, or their proxies.

Write this on a rock … Pray the world doesn’t regret America’s divesting of this last vestige of U.S. Internet ownership and control.

Three new reasons to expand your market horizons

More than ever, 21st century small businesses have reasons and resources to expand opportunities beyond local markets, including international trade, and specifically exporting. Yet even though 97% of all U.S. exporters are small companies, only a fraction of that sector are exporters.

But there’s good news that should cause the number of small exporters to increase. The convergence of new technology, a global “new economy” culture more inclusive of small businesses, and believe it or not, help from the government, are making it easier for small firms to expand their market reach. But easier doesn’t mean effortless, inexpensive or justified, which are three of the key factors of any export strategy.

Let’s take a look at the possibilities of creating a trade strategy by getting help with those three factors, with emphasis on help from the government.

Effort
For a long time, exporting was the domain of those large firms that could afford to have international professionals on payroll or contract. The education and prospecting process alone was daunting enough to dampen the ardor of even the most determined prospective small exporter, let alone the actual execution of doing business abroad.

But today, it’s hard to imagine something with so much potential being as easy as walking into one of the 100+ U.S. Commercial Service offices (a Department of Commerce division) around the U.S. and asking them to help you begin the education and prospecting process. They have the staff, information and resources to get you started, and will help you along your export strategy journey. And any associated costs are minimal.

Expense
It wasn’t so long ago that someone had to physically travel to foreign markets, establish relationships with agents and customers, and then demonstrate the goods in-country. For most small businesses, those steps were financially prohibitive.

Today, that same Commercial Service office will help you find foreign prospects, coordinate introductions and demonstrations, and bring the parties together in the early stages of a relationship without prohibitive expense. It’s all done by video conference meetings in the Commercial Service office, between you and a prospect they likely helped you find. So by the time you make a significant investment, it will be spent a lot closer to fulfilling a sale. And you’ll consider any associated fees a bargain.

Justification
How do you justify developing an international strategy? Why spend time and resources trying to sell your stuff on the other side of the planet when customers are right next door? Consider these reasons:

  • More than 96% of the world’s consumers live outside the United States.
  • This year millions of Earthlings will have a smartphone for the first time who’ve never before been on the Internet or owned a computer. Don’t wait until some of them find you online to begin your international export preparation.
  • There are many examples of small businesses that minimized a downturn in the U.S. economy because their international strategy took up the slack.

New technology, new attitudes, new resources, and yes, help from the government, are bringing the world closer to your business’s door step. But you have to make the effort to meet the world halfway. Take your first step here: www.export.gov.

Write this on a rock … Education, expense, justification – check, check and check.

Online Poll: How do you feel about the future of America?

The Question: As you contemplate Independence Day, how do you feel about the future of America?

8% - America’s best days are still ahead.
6% - America’s best days are behind us.
83% - America’s in trouble, but we can still turn it around.
3% - Never mind America, the whole world is going to hell!

Jim’s Comments: As you will see in the results of our recent online poll above, more than eight of ten of our respondents have serious concerns about America’s condition and future, with only 8% who’re optimistic about how things are. By comparison, the national average reported by Real Clear Politics — which homogenizes seven large polls — reports two-thirds of Americans think we’re “on the wrong track.” Perhaps the reason our folks rank their concerns a little higher than other polls is because we’re responsible for making payroll every week or two, which, under the current regulatory and economic conditions, is getting more and more difficult.

The last time I saw this level of concern among Americans was almost 40 years ago, during the Carter Administration. In fact, President Jimmy gave the name to the general national feeling that was pervasive during the last half of his one and only term. In a television address, he actually said there seemed to be a kind of “malaise” in the country. He was right.

Jimmy Carter is a good man, but was a poor leader. Granted, he inherited some challenging issues, but he wasn’t a problem solver and didn’t inspire confidence. Does that sound familiar? Replace the name at the beginning of that sentence with Barack Obama and everything to follow fits, with one exception: Obama has had two terms to make a difference. Sadly, if you converted the polling numbers for our national condition under this president’s watch to letters they would spell: malaise.

And my criticism isn’t political — I worship at the throne of results. Two things cause Americans to have a positive outlook: feeling secure and feeling successful. Unfortunately, looking at the facts — and the polls — in front of our eyes, these two areas are not positive.

Here are four simple traits that I would like to see in our next president, and I don’t care which party the possessor of these comes from:

  • Proven leader who hates mediocrity
  • Passionate about America’s greatness
  • Politically incorrect about defending America
  • Believes economy can grow at more than 2%

    What does your list look like? If you’d like to tell me, leave a comment.

  • Mr. President, a recovery is not an expansion

    Dear President Obama:

    For as long as there have been organized economies there have been economic cycles, of which there are essentially three elements:

    • Beginning at the bottom, a recession (sometimes, but rarely, a depression). Historically, sir, recessions are short – often measured in months.
    • In the middle is a recovery, which has the task of healing the defects that caused the downturn while reversing negative growth. Depending on the severity of the recession, recoveries take a little longer, from months to a year or so.
    • And finally, the tide that floats all boats, the expansion. Expansions can last for years, as they did under two of your predecessors, Reagan and Clinton.

    In America, we expect a recovery to be a means to an end, not a way of life. Alas, that isn’t your standard, because perpetual recovery has been our economic fate since you took office, four months before the Great Recession ended in June 2009.

    Recently, in a speech in Elkhart, Indiana, you said this: “By almost every economic measure, America is better off than when I came here at the beginning of my presidency.” Those of us who have made payroll every month of your tenure see things differently, as, apparently, does your own Department of Labor. Two days after the Elkhart speech, the Bureau of Labor Statistics reported a measly 38,000 jobs were created in May – the worst jobs month in six years. And labor participation – the number of Americans who work – has languished under your watch at rates not seen since the last president who manufactured malaise, President Carter. You can’t have an expansion, sir, if people aren’t working.

    Let’s review your economic performance, Mr. President, by the numbers. First, we’ll cut you some slack and throw out your first year in office, 2009. The recession ended halfway through, but ’09 was a horrible year you didn’t create, going almost 3 percent negative. But the next six years, through 2015, the economy averaged a pitiful 2.15% GDP growth. Those are not expansion numbers, sir, and they’re the worst for any president since World War II. Any economist will tell you an expansion is annual growth averaging at least 3%. By the way, 2016 is not trending any better than the past six.

    It’s a misnomer to refer to a president as “handling of the economy,” because there are really only two ways you factor directly into its performance: 1) helping by getting government out of the way of job creators; and 2) hurting by putting government in the way. Mr. President, you’ve set a record for the latter as an unprecedented assaulter on job creators. Your weapons are:

    • Anti-business rhetoric – “You didn’t build that” and referring to successful people as “fortunate” who need to pay their “fair share”;
    • Anti-business laws – both the specter and the reality of Obamacare, plus Dodd-Frank, to name the big two;
    • Anti-business regulations, guidance and executive orders from your EPA, NLRB, Labor and FCC.

    All of these are unprecedented for any president in their tone, scope, and damage. Not to mention the palpable fear and uncertainty that manifested among job creators.

    Here’s more evidence: The NFIB Index of Small Business Optimism, the gold standard for such research, reports the longest stretch of pessimism in the Index’s 43 years during your presidency. This from the sector that creates over half of the jobs and half of the U.S. economy. In my own polling of small business owners, only 9% think you have “been good for the economy,” while more than two-thirds think your policies have been “an economic nightmare.”

    Referring to the economy in the Elkhart speech, you said, “We can make it even stronger.” Who are “we,” Mr. President? The Oval Office door will soon hit you in the backside for the last time. With all due respect, sir, if “we” make “it” stronger, that will happen after you leave.

    Write this on a rock … Out here on Main Street, Mr. President, we’re not going to miss you when you’re gone.

    What politicians, small business and mice have in common

    Almost 20 years ago, Dr. Spencer Johnson wrote a legendary book titled, Who Moved My Cheese? It tells a story about four characters who ate only cheese.

    Early in the story all four characters went to the same place in their world – a maze – to get cheese. The first two were not picky about their cheese or where they found it – it was just food. In fact, the current place in the maze where they found and ate cheese was literally just that. So when someone moved their cheese, they immediately started looking for the new place where cheese was being put.
    For the second two characters in Johnson’s story, cheese represented more than food; they had allowed themselves to become defined by the specific cheese found in that specific place in the maze. To them, this cheese was more than nourishment, it also represented their esteem, success and happiness. You’ve heard of being hidebound. Well you might say these two were cheesebound (my term, not Johnson’s), which really wasn’t a problem until someone moved their cheese.

    Twenty-five years ago, in his book (and film), Paradigms: The Business of Discovering the Future, futurist Joel Barker defined a paradigm as a set of rules that: 1) establishes/defines boundaries; and 2) tells you how to be successful within those boundaries. Barker says paradigms, both written and unwritten, can be useful until there’s a shift, which is what happened to the cheesebound characters in Johnson’s story. When someone moved their cheese, instead of looking for new cheese like their maze-mates, they whined and dithered so long in the old place – now devoid of cheese – that they put their survival in jeopardy.

    Johnson’s cautionary tale – and the two sides of Barker’s paradigm coin – apply to all parts of life, especially politics and business.

    For generations, the Democrat and Republican Parties each showed up at the same corner of their own political maze where they had always found the same cheese. Like the second characters in Johnson’s story, both parties had been nourished and defined by the cheese they found in that specific spot. But when someone moved their cheese, as the electorate is doing now, the cheesebound members whine and struggle to maintain their identity instead of taking action to find new cheese. In his book Johnson says, “Old beliefs do not lead you to new cheese.”

    Meanwhile, Bernie Sanders and Donald Trump are like the first two characters in Johnson’s story. Neither define themselves by the old cheese in the old location. They went looking for and, to the surprise of their party leadership, found new cheese. Johnson says, “Movement in a new direction helps you find the new cheese.”

    Small business owners should watch the clinic that the Democrats and Republicans are putting on this year on the wages of being cheesebound. Like the electorate, customers are moving cheese and shifting paradigms all over the marketplace. You cannot afford to become cheesebound.

    Write this on a rock … Blasingame’s Law of Business Love: It’s okay to fall in love with what you do, but it’s not okay to fall in love with how you do it.




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