The Obama administration publicly touts the Department of Labor’s new overtime rule as a boon for workers. But the rule, which dramatically raises the salary threshold for overtime eligible employees from $23,660 to $47,476, inadvertently hurts workers — as well as non-profits, universities, and small businesses.
That’s why Republicans in Congress are attempting to roll it back. On June 7, Senator Lamar Alexander (R-TN) joined by 43 other senators filed a resolution of disapproval under the Congressional Review Act to nullify the government wage mandate. The CRA has little to no chance of passage. Undoubtedly, President Obama will veto the resolution, and there are not enough Republican votes in Congress to override a veto.
But Congressional Democrats should also take the concerns of those who will be negatively impacted by the rule seriously — especially since many of them are traditional supporters of the Democratic Party.
On June 7, the Senate Subcommittee on Labor, Health and Human Services, Education and related agencies had a markup of the labor appropriations bill. Senator James Lankford (R-OK.) expressed the concerns of university officials about the overtime rule:
As soon as [the overtime rule] was finalized, the first people to start texting me were university presidents saying “when tuition goes up next year do not blame it on me.” This overtime rule will have a very significant effect on the cost of tuition for students all around the country.
Non-profits are also caught in the DOL’s crosshairs. Many in the industry worry they will not be able to stay operational.
For instance, the Senate Small Business & Entrepreneurship Committee held a hearing in May to discuss the potential impact of the overtime rule. Vice President of Human Resources Nancy Duncan testified on behalf of Operation Smile — an international charity that provides medical surgeries for children with cleft lips, cleft palates, and other facial deformities — saying that the rule “will increase our payroll cost by nearly $1 million annually affecting over 50 percent of our workforce.” In real terms, that means Operation Smile would provide “nearly 4,200 fewer surgeries …globally each year.”
Those non-profits that rely on Medicaid funding are put in a tough bind as well. Without an increase in Medicaid funding, which is unlikely, it will be difficult to continue operations.
Gabrielle Sedor, a representative from American Network of Community Options and Resources (ANCOR) — a non-profit trade association of employers that provides services to the disabled community — expressed similar concerns. The overtime rule would force “over 20 percent” of member organizations “to reduce services, and that's a real challenge, because in every state the need for services to people with intellectual disabilities is growing,” she said.
ANCOR also commissioned an analysis, conducted by the health research firm Avalere Health, to estimate the impact of the DOL’s proposal on community providers serving people with intellectual and developmental disabilities. The analysis found that these service providers face an estimated $1.05 billion in costs from the proposed overtime rule if they choose to pay overtime to employees who are no longer exempt.
Nor did the DOL take into appropriate consideration the immense administrative burden the overtime rule will have on small businesses.
According to the Office of Advocacy in the Small Business Administration, which submitted comments on the rule detail, the DOL analysis did not take the potential hardships of small business to heart and failed to “inform the public about the impact of this rule on small entities.” Small businesses — the main drivers of job creation — do not have lawyers and human resource staff readily available to help with regulatory compliance the way big business do.
Worst of all, the overtime rule hinders worker opportunities.
Numerous junior and assistant managers who have worked hard to attain professional status could find themselves demoted to hourly workers as employers look for ways to avoid added labor costs. And consider that benefits such as flexible schedules and paid leave are generally not offered to hourly staff. Workers on a management track will also be railroaded. No longer will these workers be able to accumulate the professional skills and expertise needed for career advancement.
In sum, the government wage mandate will have unintended consequences, harming employers and employees and negatively impacting services, innovation, job creation, and productivity. If the goal is to increase worker wages, there are better ways to do it. Meantime, government should steer clear of implementing rules that produce more harm than good.
Originally posted to Real Clear Policy.