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Labor Dept. Set To Raise Overtime Standards, Big Biz Clutches Pearls

Aloysius Hogan, a senior fellow at the conservative Competitive Enterprise Institute, said businesses will be lay off higher-paid executives and replace them with lower-paid workers.
Labor Dept. Set To Raise Overtime Standards, Big Biz Clutches Pearls

We all know the drill. An employer names someone an assistant manager (or even a bank VP) without any real authority or salary bump as a way of avoiding overtime laws. So this is good news for a lot of people. The business types claim it will lead to job loss -- well, they'll have to hire somebody to work those extra hours, right?

The Obama administration is on the verge of possibly doubling the salary levels that would require employers to pay overtime in the most ambitious government intervention on wages in a decade. And it doesn’t need Congress’s permission.

As early as this week, the Labor Department could propose a rule that would raise the current overtime threshold — $23,660 – to as much as $52,000, extending time and a half overtime pay to millions of American workers. The rule has already come under fire from business and Republican opponents who say it will kill jobs and force employers to cut hours for salaried employees.

“The minimum wage they can’t do,” said Bill Samuel, director of legislative affairs for the AFL-CIO. “This is probably the most significant step they can take to raise wages for millions of workers.”

Congressional Republicans are gearing up for a major battle against raising the overtime threshold. The House Education and the Workforce subcommittee will devote much of a scheduled June 10 hearing on federal wage and hour standards to the overtime rule, even if it isn’t yet released. Sen. Lamar Alexander, chairman of the Senate Health, Education, Labor and Pensions committee, said the rule—sight unseen—“seems engineered to make it as unappealing as possible to be an employer creating jobs in this country.”

The business lobby, which is currently battling in two court venues what it calls the National Labor Relations Board’s “ambush elections rule” streamlining union elections, is likely to devote at least as many resources to fight the overtime rule. Randel Johnson, senior vice president for labor at the Chamber of Commerce, warned Labor Secretary Tom Perez in a Feb. 11 letter that any changes to existing overtime rules “threaten to upend years of settled law, create tremendous confusion, and have a significantly disruptive effect on millions of workplaces.”


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By law, any salaried worker who earns below a threshold set by the Labor Department must receive overtime. The current threshold of $23,660 lies below the poverty line for a family four. The proposed rule is expected to raise that to somewhere between $45,000 and $52,000—closer to the median household income—greatly expanding the pool of Americans who qualify for overtime pay.

The overtime threshold is not indexed to inflation and has been updated only once since 1975. It covers 12 percent of salaried workers. Boosting the threshold to $50,440 would bring it back in line with the 1975 threshold, after inflation. By one estimate that would give somewhere between five to ten million workers a raise.

Some workers above the salary threshold also qualify for overtime pay under current law. But the historic shift from a manufacturing-based economy to a service economy has reduced their number because white collar workers—defined quite expansively—are exempt. The forthcoming overtime rule is expected to tighten up that definition.

Under the current rules, the white collar exemption excludes “executive, administrative and professional” employees from receiving overtime pay, which means, for example, that a secretary will sometimes be ineligible for overtime pay. Employers routinely avoid paying overtime to lower-wage workers such as store managers or fast food shift supervisors, and even to some non-supervisory workers by giving them discrete, only nominally supervisory responsibilities.

“It’s hard to believe that somebody making $30,000 is a supervisor,” said Daniel Hamermesh, an economist at the University of Texas at Austin, who has done extensive research on overtime. “At this point, I don’t think even our regulations are in line with the original intent of the law.” Hamermesh said raising the threshold was “an absolute no brainer.”

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