Last week, the Obama Administration announced a proposal that would make nearly 5 million more workers eligible for overtime benefits, but could cost businesses close to $900 million.
An estimated 20,000 Maine workers would be affected and would be subjected to the new regulations from the U.S. Department of Labor, which could take effect as early as January 2016.
Industry and business groups, and many Republicans were quick to condemn the proposed changes. The National Retail Federation (NRF), the world’s largest retail trade association, accused President Obama of trying to “build the middle class by government mandate,” and not fully understanding how stifling government regulations can hinder businesses’ growth.
The changes could cost businesses nearly $900 million according to a recent report by the NRF, while the White House’s estimates the costs to be $240 million.
President Obama, in an article in the Huffington Post defended his proposal, and explained that “too many Americans are working long days for less pay than they deserve,” and insisted that it was time to update overtime work regulations that were last modified in 2004.
Currently, workers earning less than $23,660 annually are automatically eligible to receive overtime pay if they work more than 40 hours per week. For employees who earn more than $23,660 a year, employers conduct a “duties test” to assess their eligibility; executive, administrative, or professional employees are exempt from the rule, as are many seasonal workers, fishermen, and farm workers. For instance, a manager at a fast-food restaurant may not be entitled to overtime benefits, despite earning $30,000, working 55 hours a week, and performing duties similar to the kitchen staff.
The changes envisioned by the Obama administration would more than double the salary threshold, placing it at $50,440 per year. The White House is also considering repealing various exemptions to overtime pay eligibility, many of which it claims are either obsolete or easily exploitable by callous employers.
The U.S. Department of Labor claims to have the authority to enact such changes at the president’s behest without congressional approval based on the Fair Labor Standards Act of 1938, which grants the executive branch broad jurisdiction over labor regulation. However, legal experts say the policy would be vulnerable to litigation.
Proponents of the measure say that it’s merely an attempt to cope with inflation and the shifting landscape of employment in America, not an effort to revolutionize wages or burden employers. Harley Shaiken, an economist at UC Berkeley, notes that “we have seen inflation repeal the regulations that went into effect decades ago.”
According to the White House, less than 8% of full-time salaried workers are covered by overtime regulations, compared to 60% in 1975; much of this decline is due to employment growth in sectors of the economy exempted from the regulations, such as administrative positions.
The U.S. Chamber of Commerce also expressed concerns with the new regulations, saying that the White House was “adding more burdens to employers and expecting them to just absorb the impact.”
Senator Lamar Alexander of Tennessee, chairman of the Senate’s labor panel, also ridiculed the idea for making it “as unappealing as possible” for companies to create jobs.