If you think you’ve heard it all on the new overtime rule introduced by the Obama administration back in 2014, you’re mistaken. Both sides on the issue are rolling up their sleeves and digging their heels in for a long and complicated battle.
The overtime rule, which was finalized in May, changes the minimum overtime exempt pay from $23,660 per year to $47,476 per year. The law was originally set to go into effect on December 1, but the U.S. House of Representatives says not so fast. On September 28, the House approved legislation to delay the overtime rule from going into effect until June 1, 2017. This is a delay of six months from the originally approved start date.
According to Mary Kassis, Economics Professor at University of West Georgia, this vote doesn’t mean that the new timeline is set in stone. “Although the House has passed the bill to delay the new rules, it is not clear that the bill will pass the Senate, and even if it does, the president is likely to veto it,” Kassis said.
Concern over the Overtime Rule Continues to Rise
Mary Hodson, president of the Hutchinson Area of Commerce & Tourism in Minnesota said that local business owners have expressed concern over the large jump in compensation and they would have preferred the adjustment to be on a much smaller scale. Currently the rule has more than doubled the exempt salary threshold. “Many businesses have to make tough decisions about how to staff their business hours/services,” Hodson said.
Neil Lesher, a legislative director for the Pennsylvania chapter of the National Federation of Independent Business said that the announcement of the new rule set small businesses into a state of panic. “The feedback we’re getting is one of frustration,” he said.
Donna Partin, owner of an apartment cleaning service in Lancaster, Pennsylvania, said that the change will be detrimental to her employees as well. Her employees currently work only as long as it takes to get the job done and the pay remains the same. “I don’t care if she works 5 hours a week or 50 hours a week, if she gets her work done,” Partin shared. The new overtime will change all of that said Partin. “She’s going to have to punch a clock…No more personal errands. No going over 40 hours,” she added.
The concern doesn’t end there. In September, 21 states banded together to challenge the overtime rule by filing a lawsuit in the United States District Court for the Eastern District of Texas. The lawsuit alleges that the “new rule will force many businesses, including state and local governments, to unfairly and substantially increase their employment costs.” The twenty one states involved in the lawsuit are: Alabama, Arizona, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah, and Wisconsin.
Supporters Still Believe Change is Beneficial
Despite the protests from many business owners, lawmakers and workers, the new overtime rule still has plenty of supporters. The Economic Policy Institute (EPI) has estimated that the new rule will benefit 12.5 million exempt workers. According to its analysis, the EPI projects that women will be the largest group affected with nearly 6.5 million women receiving direct benefits from the change.
Dr. David Weil, administrator of the Wage and Hour Division within the U.S. Department of Labor said that the American worker will benefit from the law because either they will receive additional compensation for extra hours worked, or they will have more personal time afforded to them.
President Obama has long touted the benefits of the rule saying it is “the single biggest step I can take through executive action to raise wages for the American people,” in a radio address in May. Nick Hanauer, a billionaire labor advocate and venture capitalist agrees with Obama. He believes that millions of American workers will benefit by receiving a pay raise when the law is rolled out. Hanauer also believes that unemployment rates could be positively affected because those employers who decide to keep a 40-hour-a-week cap will be forced to hire additional workers.
Be Ready for Anything
The American worker and business owners should be ready for anything when it comes to the new overtime rule. Both sides of the issue will continue to fight it out in the judicial system and it’s anybody’s guess if the rule will manage to be rolled out or when. In the meantime, employers need to be prepared for either outcome. Don’t be taken by surprise because you waited on the sidelines until the red tape was removed. The following steps should be taken while the powers that be come to a final decision:
Review salaried positions. Business owners and HR managers should review all salaried positions to determine which ones will become eligible for overtime when/if the law goes into effect.
Know what the changes mean. Employers and HR personnel should take this time to study and understand what the new overtime rule will mean. An explanation of the final rule is available on the Federal Register website.
Plan your strategy. Employers should discuss their options under the new law and devise a plan of how employees will be affected. For instance, employers should determine which workers will have their salary raised to meet the new threshold and which will be converted to non-exempt status.
Be ready. Be ready for the rule change by having all managers/owners trained and educated on how to roll-out the change with minimal impact on costs and productivity.
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