The Department of Labor’s (DOL) final Overtime Rule will make it harder for small businesses to grow and create jobs as well as harm the employees it is designed to help, a panel of experts testified before the House Committee on Education and Workforce.
The Department of Labor in May issued new overtime rules that double the minimum salary threshold that employees must earn to be exempt from overtime pay, increasing the figure to $47,476/year ($913/week), up from the previous salary of $23,660 ($455/week). This number will be automatically updated every three years based on wage inflation. The new rules do not change the so-called “duties test” applicable to employees who earn more than this salary threshold. The new salary threshold will go into effect Dec. 1, 2016.
Panelists testified before the House Committee on Education and Workforce, chaired by Rep. John Kline (R-Minn.), that the new overtime rule will lead to fewer jobs, less workplace flexibility and fewer opportunities to climb the economic ladder.
Alexander Passantino, a partner at Seyfarth Shaw LLP in Washington, D.C., testified on behalf of the small business community that employees will work the same and earn the same, but they will lose flexibility and be required to track their work in a way that they have not done previously. “Teamwork, productivity, and morale will undoubtedly suffer,” he said, [the rule will have] the perverse effect of forcing many employers to take away benefits, job security, and opportunities for advancement for those employees who will lose exempt status.”
Passantino also testified that the regulatory familiarization, adjustment, and managerial costs will be significant for all employers, especially for small businesses.
“These organizations have the least discretion in their budgets and, in many ways, they will need to be the most creative in developing solutions,” Passantino testified.
University of Kansas Vice President Michael Rounds testified that tuition will be increased in future years as a result of the overtime rule as universities are unable to “absorb costs of this magnitude without an impact on our academic, research, and outreach missions that will be felt by the public we serve.”
Senators Lamar Alexander (R-Tenn.) and Ron Johnson (R-Wisc.) introduced a resolution to block the overtime rule under the Congressional Review Act. Sen. Johnson called the rule “a solution looking for a problem” and Sen. Alexander warned that “it will increase college tuition and limit workplace flexibility.” Although the resolution will likely pass the Republican-controlled Congress, President Obama is expected to veto it.
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