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Expanding overtime protections to more workers could stifle entrepreneurism
Updated 5/18/2016. The White House and Department of Labor have announced the new rule governing exemptions from overtime pay. See SHRM Online's FLSA Overtime Rule Resource page for full details.
The Department of Labor’s (DOL’s) overtime rule has the potential to disproportionately harm millennials. Millennials have been called the “startup generation,” but startup companies almost always require long hours and low wages to become big and stable. They often offer their workers equity so the employees profit if the company does well. That approach may become harder to pull off under the proposed overtime rule.(The Daily Caller, published 4/10/2016)
Short Period to Comply
The time to start preparing for the overtime rule is now, particularly since employers are likely to have as little as two months to comply, according to a management attorney. (The final rule becomes effective Dec. 1, 2016.) Determining whom to reclassify and implementing that change generally takes up to six months, Tammy McCutchen, an attorney with Littler Mendelson in Washington, D.C., said at the Society for Human Resource Management (SHRM) Employment Law and Legislative Conference. Plus, “business partners need to understand the possible budgetary impact of the salary-level increase.”(Bloomberg BNA, published 4/11/2016)
Small Businesses Will Be Hit Hard
Small businesses with a high number of hourly and seasonal employees, nonprofits, retail, restaurant and manufacturing will be most affected by the rule, according to an executive at a provider of HR and payroll software. She recommended that small business owners have a plan for each employee earning less than $50,440 per year. (The final rule set the exempt salary threshold at $47,476.)(AccountingWEB, published 4/11/2016)
SHRM Criticizes Proposed Overtime Rule at House Hearing
Criticism of the proposed rule continues, even though it’s been sent to the Office of Management and Budget for final approval. At a March 29 U.S. House of Representatives field hearing held in Michigan, a SHRM member testified that the increase in the salary threshold for overtime pay from $23,660 to $50,440 is “too much, too fast.”(SHRM Online, published 3/30/2016)
Bill to Block Overtime Rule Introduced
An 11th-hour push is on in the House of Representatives to try and nullify the proposed rule. The Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773) would require the Department of Labor to first conduct a comprehensive economic analysis on the impact of mandatory overtime expansion to small businesses, nonprofit organizations and public employers and prohibit automatic increases in the salary threshold. It provides “a clear vehicle to push back on the overtime rule,” said SHRM’s director of congressional affairs.(SHRM Online, published 3/18/2016)
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.
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