BY MAUREEN N. MARATITA
Journal staff

A potential increase in the local minimum wage is the least of the troubles facing employers in Guam.

In a move that will affect all employers, the U.S. Department of Labor is in the final approach to a rule to increase the minimum salary for exempt workers to $35,308 annually under the Fair Labor Standards Act.

Whether Guam, the Northern Mariana Islands and the other U.S. territories will be exempted is not clear.

Charlotte D. Huntsman, president of the Society for Human Resource Management Guam Chapter, confirmed to the Journal that a final rule from DOL is awaited. Huntsman is also senior vice president for human resources and organizational development at the Guam Regional Medical City.

Huntsman

The regulations were submitted to Congress for its approval.  As yet there is no exemption for the territories of Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands. The ruling specifically states that the exempt level in the territories would be $455 per week or $23,660 annually and for American Samoa a lower rate of $380 per week.

Huntsman said, “Congress is still looking at the rules on whether the territories — all of them, to include Samoa — would be exempt on some of the ‘white collar’ exemptions. There hasn’t been any ruling yet on that and so as it stands now we would have to follow those new white collar exemptions.”

Some contract workers who are managers in the NMI would also be affected, she said. “CW workers have been paid at $7.25 per hour, so they’re now up to the federal level — at least $7.25 per hour.”

The ruling will also become a government of Guam budget issue, since it affects all government workers also. It is anticipated to take effect in January 2020.

Huntsman said pending minimum wage legislation in Guam may not be a helpful move. “Even our minimum wage on Guam is higher than the federal minimum wage; it’s $8.25.” She said any further increase in the minimum wage on Guam could hurt the island’s case for FLSA exemption. “If I’m looking at it from an outsider — why then wouldn’t we increase everybody’s [salaries]?”

Pending legislation in Guam would increase the minimum wage to $8.75 an hour by March 1, 2020, and ultimately to $9.25 an hour by March 1, 2021.

The final rule could be published towards the end of the current budget cycle, Huntsman said. “I think sometime in September.”

As to the effect of the ruling, she said, “I know it will hurt a lot of employers.” Americans in general, to include Guam, work a lot of hours, she said. “We work our managers much more than 40 hours in a work week. … The law says we can do that, within reason of course. It will absolutely affect us.”

Compression would be likely, Huntsman said. “It would in essence affect even those employees that are not affected by that salary increase. The company must really think about those employees; employee morale would go down.”

The Guam Chapter of SHRM typically follows national policy, she said. “SHRM agrees to the increase of $35,308. It’s a compromise of course from when Obama was president and that first proposal to increase the white collar [salary] from $23,660 to $47,000.”

The Guam chapter does not have its own position on the proposed increase. “We haven’t surveyed our members on this increase. What we were waiting for was to see if there were any rules that would change to exempt Guam from that.

“When the ruling says ‘All the territories except for American Samoa are not exempt,’ then we’ll go and ask our members.”

 However, Huntsman said, “This would negatively affect a lot of our organization members. … It’s a pretty high increase for everybody.”

She said companies could have fewer managers or keep staff as hourly employees, without managerial duties.

The U.S. Congress in a May 15 FAQ, suggested ways that employers can comply with the ruling. These include:

  • pay overtime to newly covered EAP employees if they work more than 40 hours a week;
  • increase the weekly pay for workers near the salary threshold to a level above it;
  • reduce work hours of nonexempt (covered) employees to 40 or fewer so that overtime pay would not be triggered;
  • hire additional workers to offset the reduction in hours from nonexempt employees; or
  • reduce the base pay of nonexempt workers and maintain overtime hours so that base pay plus overtime pay would not exceed, or would remain close to, previous employer costs of base pay plus overtime.

The rule will also raise the “highly compensated employee” package to $147,414 per year.

The ruling is likely to be a surprise to a number of businesses on Guam, Huntsman said. “What’s been emphasized here is the hourly wage — the local wages going up.” SHRM was aware of it, she said. “As HR professionals, we would prep our organization. There are a lot of companies that don’t have HR-specific people. The owners do everything — HR and finance.” mbj