March 15 2014
Patrice J. Lee
The President exercised executive privilege once again this week by meddling in the labor market to expand overtime pay.
In an announcement that stunned and blindsided the business community, the President will direct the Labor Department to raise the threshold of workers who qualify. That pool of workers potentially expands to include as many as ten million new workers in positions at banks, restaurants, convenience stores, and so-called “white collar” jobs in administrative or professional posts. Current rules limit overtime pay to salaried workers making less than $455 per week. The President would redefine which workers can be classified as ineligible for overtime pay.
“Due to years of neglect, one of the linchpins of the middle class, the overtime rules that establish the 40-hour workweek, have been eroded,” the official said. “As a result, millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay. It’s even possible that some of these workers make less than the minimum wage per hour.”
The White House did not say by how much Obama will direct the Labor Department to raise the federal minimum threshold. The official said Obama will merely direct Perez to “begin the process” to determine what the new standard should be and then propose a new rules to determine both the pay threshold and a federal definition of a white collar worker.
This is part of a coordinated effort to raise the pay for low-wage workers, joining with his efforts to raise the national minimum wage to $10.10 per hour.
The President warned that this is a year of action and so far he’s made it about his action. The timing is not coincidental. Since, he plans to work around Congress – instead of with Congress- he is taking the regulatory route. Complex rules regularly take a year or more to develop and be put into place, which doesn’t leave him with much time. The previous update to overtime regulations took over a year to complete and faced an intense fight in Congress according to the person who presided over it.
Haste is nothing new for this Administration. Remember ObamaCare? In the haste to get navigators in place and enrolling Americans in ObamaCare, tax-payer dollars were used to hire workers with criminal records as the Administration cut corners on background checks. The emphasis was –and still is- about getting something done quickly versus done right and done through the best channels.
This announcement stirred up business groups that were surprised by this new regulatory change and argue it will present yet another hardship on business. Even more, they are predicting economic harm from this action.
The Hill reports:
Trade associations already battling the White House over a proposal to raise the minimum wage to $10.10 per hour said they were blindsided by the announcement.
“This came as a shot out of the blue,” said David French, the National Retail Federation’s senior vice president for government relations. “Just on the surface, this looks like an enormous new administrative burden.”
“Changing the rules for overtime eligibility will, just like increasing the minimum wage, make employees more expensive and will force employers to look for ways to cover these increased costs,” said Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce.
Can we predict what exactly will happen? No, but if economic principles hold true, jobs may be at risk.
Supporters think the update of that $455 pay level and a rewrite of the exemption rules could have a stimulative effect by giving workers more money to spend. However, these proposals increase labor costs and as businesses adjust they may be slow to hire or they may lay off workers. It’s especially critical in the food industry where profit margins are razor thin for restaurant owners.
We will likely see more of this as the President tries to enact his liberal agenda while he’s still in office and while Democrats maintain leadership of the Senate.