The Obama administration overtime pay mandate will put a big burden on small business and won’t necessarily lead to higher wages, a new report from the Competitive Enterprise Institute explains.
“The proposed overtime rule imposes substantial costs, which businesses have to make up for somewhere,” says Trey Kovacs, CEI labor policy expert and author of the report. “Often, that means reducing wages or hiring fewer workers.”
It’s “extremely unlikely that employers would keep labor practices constant and simply absorb the Department of Labor’s projected $1.3 billion in additional costs,” says Kovacs.
The current overtime rule requires time-and-a-half pay for every hour above 40 that an hourly employee works in a week or for salaried employees who perform executive, administrative, professional, and outside sales activities and who make less than $23,660. The proposed rule raises the salary threshold to $50,440.
Congress could take action to try to stop the rule or mitigate its worst effects, the report suggests. That would mean challenging the rule under the Congressional Review Act, which authorizes Congress to file a joint resolution of disapproval of federal regulations within 60 days of being finalized. Or pass legislation requiring Congressional approval for changes to current overtime rule exemptions.
The final overtime rule is expected in July, 2016, from the Department of Labor.