New Overtime Regulations Could Affect Your Gym’s Bottom Line

In 2018, the U.S. health club industry pulled in $32.3 billion in revenue. This success is primarily thanks to the people in this industry, from owners to front desk staff, who are dedicated to improving the health and well-being of people of all backgrounds and abilities. But your club's future revenues could be at risk due to the Department of Labor's proposed changes to current overtime regulations that could affect the way your business operates.

The Current Law

Under the current law, employees working more than 40 hours per week are exempt from overtime if:

• the DOL would classify the employee as white-collar if the employee is salaried making $23,660 or higher.

The Proposed Changes

Two of the DOL’s proposed changes include:

• raising the minimum salary required for an employee to qualify for overtime exemption from $23,660 to $35,308 per year
• increasing the total annual compensation requirement for “highly compensated employees” from $100,000 to $147,414 per year

As a club operator, you may wonder how this could affect your bottom line. Well, it might end up saving you money to just give your employees raises.

“If the regulations are approved, then a manager or supervisor paid between $23,660 and $35,308, who would be otherwise eligible to be exempt from overtime pay for hours worked over 40, would have to be paid overtime for all hours worked over 40,” says Helen Durkin, J.D., IHRSA’s executive vice president of public policy. “If an employee is close to the new proposed threshold and routinely works over 40 hours, then it might be less expensive to raise that employee's salary.”

According to IHRSA's Health Club Employee Compensation and Benefits Report, there are very few positions at U.S. health clubs that would have to adjust to meet the proposed total annual compensation for "highly compensated employees."

“Under current DOL rules, employees making annual salaries of $100,000 or more are considered highly compensated employees and are exempt from overtime if they meet a reduced duties test, which means that their primary duties are non-manual office work and they ‘customarily and regularly’ perform one of the exempt duties of white-collar employees,” says Durkin.

Even though the proposed changes would not impact the reduced duties requirement, it would change the salary required to qualify as a "highly compensated employee," which Durkin says may not have a big impact on your business.

For example, if a general manager at your club makes over $35,308, or has employees reporting to them with authority to hire and fire, then they may qualify for an exemption from overtime pay. In this case, the employee already makes more than the amount required to qualify for an exemption, and the DOL would not classify the employee as a highly compensated employee so the proposed changes would not impact your business.

Staying on top of potential changes to the law can allow your business to make the best decision for your members as well as your bottom line. If these changes go into effect, it is critical to know the impact it may have on your health club. IHRSA is always working to fight back regulations and legislation that could put your health club at risk of losing money or going out of business. Stay up to date on the latest legislation and rules that can affect the way you operate by subscribing to the IHRSA Advocate.