Companies and business groups blasted a White House proposal
to expand eligibility for overtime pay to around five million more Americans,
warning that the move would curtail work hours and dent job growth as employers
look for ways to control costs. The proposed rule, unveiled Tuesday, would
raise the salary threshold that generally determines who is eligible for
overtime pay to $970 a week, or about $50,400 a year. That would be more than
double the current threshold of $455 a week, set in 2004.
The proposal is the fulfillment of an executive order
President Barack Obama issued last year to update overtime rules
diminished over the years by inflation. At the time, the White House said 12%
of salaried workers were below the current threshold, compared with 18% in 2004
and 65% in 1975. The U.S. Chamber of Commerce said the proposal would cause
workers to lose benefits and flexibility, and curb career advancement.
Restaurant operators and retailers are among those
particularly concerned about the higher threshold because some of their
managers would be eligible for overtime pay for the first time. Under existing
rules, workers who are paid by the hour or earn a salary below the threshold
generally are eligible for overtime if they work more than 40 hours a week,
while those with salaries of at least that amount who work in white-collar jobs
generally aren’t.
Some economists don’t foresee any dire consequences from the
proposed rule. When questions such as raising the minimum wage or expanding
overtime eligibility come up, “the business community says the sky is falling
and jobs will be lost,” said Paul Osterman, a labor economist and professor at
the Sloan School of Management at the Massachusetts Institute of Technology.
Data indicate such predictions don’t come true.
At a conference of the Society for Human Resource Management
in Las Vegas, at least a dozen attendees stepped up to the microphone Tuesday
at a session on the new rule to express concerns about the expense of tracking
hours and overtime, especially for those working flexible hours or remotely.
Employers, many of them nonprofits with low-paid workforces affected by the
proposed rules, also were anxious they might have to cut benefits to make up
for higher overtime costs.
It will take the Labor Department many months to finalize
the new rule, after a 60-day comment period. But Labor Secretary Thomas Perez
said Tuesday that he expects companies to end up paying U.S. workers up to $1.3
billion more a year in overtime wages. To avoid the higher wage costs, David
McDougall, chief executive of Nashville-based Back Yard Burgers Inc., said
he plans to convert about two-thirds of the 22 salaried general managers at his
company-owned restaurants to hourly wages. He will figure out an arrangement
that ensures their total compensation doesn’t increase significantly, even
accounting for overtime.
Those general managers on the upper end of the pay
range–which ranges in total from $35,000 a year to about $52,000 a year, plus
bonuses—will remain salaried. If necessary to avoid paying overtime, Mr.
McDougall said, he will boost their pay so it exceeds the new threshold. Mr.
McDougall that if his competitors don’t make similar changes, it could pose a
recruiting challenge, but thinks he still will be able to attract the talent he
needs. He plans to test the changes at company-owned stores, and then make
recommendations to his franchisees, who run 39 locations. In all, Back Yard
Burgers has about 1,200 employees in 13 states.
RELX Group’s legal team is reviewing jobs to see which
currently exempt roles might have to be reclassified. The publisher is paying
particular attention to operations staff and other employees earning less than
$60,000, according to Yvette Politis, associate general counsel. It did a
comprehensive review of exempt jobs about a decade ago, so the current review
has been simpler.
The proposed rule drew a warm response from many Democrats
in Congress and on the 2016 campaign trail, but critical comments from
Republicans. Democratic presidential candidate Hillary Clinton tweeted that it
is “a win for our economy and workers nationwide.” Sen. Bernie Sanders, an
independent from Vermont who is also in the Democratic race, called the changes
long overdue. In Congress, Senate Labor Committee Chairman, Lamar Alexander, a
Tennessee Republican, said the rule would discourage a variety of people, such
as job seekers who discover there is only part-time work available.
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