Presidential Election Will Decide Fate of Overtime Rule

Allen Smith, J.D. By Allen Smith, J.D. August 23, 2016
Presidential Election Will Decide Fate of Overtime Rule

[Editor's note: A federal district court has granted a preliminary injunction blocking the overtime rule from taking effect Dec. 1.]

The outcome of the presidential race will determine whether the Fair Labor Standards Act overtime rule will survive intact.

Democratic presidential candidate Hillary Clinton unequivocally supports the rule, while Republican presidential candidate Donald Trump told online news outlet Circa Aug. 12 that he favors a small-business exemption from the rule. 

The regulations, which take effect Dec. 1, more than double the exempt salary threshold from $23,660 to $47,476. The rule also automatically increases the threshold every three years to 40 percent of the weekly earnings of full-time salaried workers in the lowest-wage Census region, the South.

Ross Eisenbrey, vice president of the Economic Policy Institute, a Washington, D.C., think tank researching policies that affect workers, said that if Trump exempted small businesses, half of U.S. employers would be affected. "To deny overtime protection to half the U.S. workforce strikes me as a bad thing to do," Eisenbrey said. 

Jack Mozloom, media director for the National Federation of Independent Business (NFIB), disagreed, saying that the NFIB appreciates that Trump "acknowledges the impact of the rule on small businesses. Our members are very concerned about it." But Mozloom added that the NFIB couldn't take a position on Trump's statement, since "there is no meat on the bones" of the presidential candidate's assertion.

By contrast, Clinton was emphatic in her support of the rule as soon as it was issued, stating May 18, "I applaud President [Barack] Obama and Secretary of Labor [Thomas] Perez for these final overtime rules, which will lift up workers nationwide and help get incomes rising again for working families. Within the first year these rules are in effect, millions more workers will be eligible for overtime, finally getting paid in full for the hours they are putting in on the job." 

"Efforts to derail the new rule—such as the Protecting Workplace Advancement and Opportunity Act, introduced by congressional Republicans—will likely face [a] veto if Clinton wins the presidency," should legislation reach her desk, said Jim Swartz, an attorney with Polsinelli in Atlanta. "A Clinton presidency ensures [the rule's] implementation."

Small-Business Concerns

Opposition to the overtime rule continues to brew, as many small restaurants and retailers can't raise entry-level managers' salaries above the new exempt threshold and can't afford to pay the managers overtime, Mozloom said. 

He added that the overtime rule is "especially a big concern where the cost of living is low." Mozloom doesn't expect it to have as big an impact in metropolitan areas, where salaries are higher.

Jesse Panuccio, an attorney at Foley & Lardner in Miami, outlined a few other small-business concerns:

  • Raising workers' salaries to meet the exempt threshold or paying nonexempt workers overtime is expensive, and small businesses will have limited ability to increase prices to offset the costs. So, they will cut jobs or replace longer-term, higher-skilled employees with less-experienced, lower-skilled workers. "Note that increased costs come not just from increased pay but also from the cost of compliance, as businesses will now have to carefully track the hours of many additional workers" to ensure that they aren't working off the clock or unapproved overtime, he noted.
  • Managers who are reclassified as nonexempt will lose many advantages they enjoyed as salaried employees, such as work schedule flexibility, benefits packages, bonuses and promotion opportunities.
  • Businesses that raise some employees' pay above the new exempt threshold may find that doing so creates pressure for similar unwarranted raises all the way up the chain, resulting in additional costs or morale problems.
  • The rule is one-size-fits-all and does not account for regional variations in economies or variations among industries.
Panuccio noted that the Republican 2016 platform does not specifically address the overtime rule.

Support for Rule

The Democratic 2016 platform does, stating, "We will defend President Obama's overtime rule, which protects millions of workers by paying them fairly for their hard work."

Eisenbrey said that:
  • The rule won't diminish workers' flexibility, as those who earn more than $50,000 tend to have more-flexible workdays than those who earn less than that. The rule "will not make any difference" in this regard, he said. 
  • The regulations will result in an increase in spending of less than 1 percent of profit for companies in every industry. 
  • The exempt salary threshold has fallen so far from its peak in 1975 that the level would be about $64,000 if it were adjusted today to account for inflation.
  • The argument that the rule will hurt reclassified employees' morale by stripping them of their exempt status is "laughable," since workers would rather earn overtime or not work extra unpaid hours.
  • The assertion that employees will be denied promotion opportunities due to the rule is false, as employers will still consider its managers as eligible for moving up the corporate ladder.

'Wide Schism'

"The differences between Mr. Trump and Secretary Clinton on most issues are a wide schism," said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former acting administrator of the Wage and Hour Division. "The former finds fault with the new rule, as do most job creators, small businesses and employers, while the latter embraces it as part of the progressive agenda."

The Society for Human Resource Management (SHRM) "continues to support an increase in the salary threshold, but the final overtime rule goes too far, too fast," said Lisa Horn, SHRM director of congressional affairs.

"Given the significant impact this regulation will have on both employers and employees, it's no surprise that it is being addressed by the candidates for our nation's highest office," she said. "This overtime rule poses serious consequences for more than just small businesses, which is why SHRM and our members are looking to Congress for a legislative solution to provide relief to all employers."

Related Articles: 
Clinton vs. Trump: Equal Pay for Equal Work, SHRM Online, July 25, 2016


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