Democrats Propose Phase-In of Overtime Rule

Allen Smith, J.D. By Allen Smith, J.D. July 19, 2016
Democrats Propose Phase-In of Overtime Rule

​​A bill has been introduced to phase in implementation of the overtime rule.

​Representatives on Capitol Hill haven't thrown in the towel on the overtime rule: Legislation is still being introduced to alter the regulation or prevent it from taking effect. Surprisingly, though, the latest effort put forth by the rule's opponents comes from members of the Democratic Party.

The "blue dog"—fiscally conservative—Democrats have proposed legislation to phase in the overtime rule and eliminate the automatic triennial increase of the exempt salary threshold.

Rep. Kurt Schrader, D-Ore.; Rep. Jim Cooper, D-Tenn.; Rep. Henry Cuellar, D-Texas; and Rep. Collin Peterson, Minnesota Democratic-Farmer-Labor Party, introduced a bill on July 14 that would phase in the Department of Labor's (DOL's) overtime rule over three years. (The Minnesota Democratic-Farmer-Labor Party is an affiliate of the Democratic party.)

The overtime rule will increase the threshold for exempt employees by more than 100 percent from $23,660 to $47,476 as of Dec. 1. It also will increase the threshold every three years to the 40th percentile of full-time salaried workers in the lowest wage Census region, which is currently the South.

H.R. 5813—the Overtime Reform and Enhancement Act—would instead raise the new threshold incrementally over the next three years, beginning with a 50 percent increase this December to $35,984.

In subsequent years, the bill would raise the threshold to:

  • $39,814—Dec. 1, 2017.
  • $43,645—Dec. 1, 2018.
  • $47,476—Dec. 1, 2019.

Mike Aitken, vice president of government affairs at the Society for Human Resource Management (SHRM), wrote a letter to Schrader​, with a copy to members of Congress, expressing SHRM's strong support of the bill.

"The DOL's increase of more than 100 percent to the salary threshold in the first year is simply too far, too fast," Aitken wrote. In addition to phasing in the salary threshold increase, "the legislation would also prohibit the final rule's automatic increases to the salary threshold," he noted.

"Putting the salary threshold essentially on autopilot fails to consider the economic conditions at the time," Lisa Horn, SHRM director of congressional affairs, told SHRM Online. "Allowing for a notice and comment period gives the regulated community an opportunity to provide input into what an appropriate salary threshold should be, given the health of the economy at that particular time."

Horn said the bill "sends a strong message that there are bipartisan concerns about the final overtime rule and a growing interest in finding a solution to lessen the harmful impact this rule will have on employers and employees."

The phase-in would allow employers more time to absorb potential cost increases, she noted.

Other business associations—including the American Bankers Association, the U.S. Chamber of Commerce, the National Association of Home Builders, and the American Hotel & Lodging Association—voiced their support for the bill.

Jason Brandt, president and CEO of the Oregon Restaurant & Lodging Association, said that the bill "represents a common sense compromise that helps protect workers and small business owners as they adjust to new marketplace realities. We hope Congressman Schrader's legislation can jump-start congressional action."

Bill's Opponents

However, Secretary of Labor Thomas Perez came out with swift opposition to the bill.

"Millions of workers have been waiting years for the overtime rules to catch up to reality and ensure that working people get the pay or time with their families that they deserve," he said. "This legislation would ask them to wait even longer. The president and I think that American workers have waited long enough for a fair day's pay for a long day's work." He added, "By delaying implementation and removing the automatic updating of the salary threshold, the proposed legislation stands in stark contrast to that vision."

William Samuel, AFL-CIO's director of government affairs, also criticized the bill in a letter to members of Congress that urged them to oppose the legislation. Samuel said the bill "would rob millions of workers of the overtime pay protection they have earned. … Workers have waited decades for an update to the salary threshold—it has only been updated once since the 1970s, in 2004 when it was set too low. Having experienced decades of wage stagnation and uncompensated overtime, workers should not have to wait three more years for the protection the new regulations will provide."

Samuel said that the exempt salary threshold would be more than $57,000 if it had kept pace with inflation since 1975.

Business Concerns

In the face of labor's support for the overtime rule, business leaders continue to share their concerns about it on Capitol Hill. On July 12, Jamie Richardson, vice president of government, shareholder and community relations with White Castle System, a restaurant chain based in Columbus, Ohio, testified before the United States Joint Economic Committee, a committee made up of members from the Senate and House of Representatives, in opposition to the overtime rule.

"In the restaurant industry, salaried employees enjoy a number of benefits not available to hourly employees," Richardson stated. "Thus, in addition to getting paid a salary regardless of the fact that they may not be working over 40 hours a week, these newly overtime-protected employees could lose flexibility as well as benefits, including substantive bonuses, paid vacation, flextime, p​aid holidays and health insurance."

Bonuses must be included in the employees' regular pay rate when calculating overtime pay rates, even if the bonus is paid months after the overtime work took place, he noted. "Faced with the difficult recalculation of overtime rates—sometimes for every pay period in a year—employers often simply forgo these incentive payments to nonexempt employees rather than attempt to perform the required calculations," he stated.

Horn said the timing of H.R. 5813 is significant. "Now that it is out there prior to the start of a seven-week congressional district work period, hopefully Congress will hear from SHRM members and other employers about the need to find a solution when they return in September." 



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