In May, Vice President Joe Biden announced the Department of Labor’s new overtime rule during a visit right here in Ohio. Under the rule, salaried workers making less than $47,476 will be due overtime pay, approximately doubling the previous threshold of $23,660. The rule is set to take effect in December. It is a deadline most small businesses and local governments will have difficulty meeting and can ill afford.
Instead of looking at factors such as cost of living and economic impact on a state-by-state basis, the Department of Labor took the median salary in a vast region containing high-income Washington, D.C. itself, offering little thought to the needs of small businesses and local governments in Ohio when setting this arbitrary new level. The Obama administration claims they want to offer workers a raise, but ultimately this new rule reduces opportunities for promotion and reduces workplace flexibility while adding to the burden employers already face with mounting piles of paperwork. In the end, it may not even mean more take-home pay for many of these employees, as small business owners will either limit hours, eliminate positions, or some combination therein an effort to stay “on budget”.
Previously, managers have been considered exempt from overtime pay as the expectation was that those positions came with the responsibility to do what it takes to get the job done. With the expanded overtime rule, employers will now have to spend more time closely documenting and managing working hours to avoid facing federal penalties or potential lawsuits. Those previously salaried employees may have to go back to punching a clock while working from home or telecommuting would be strictly limited or eliminated. The flexibility many enjoyed if in a salaried position will be eliminated.
For many small businesses, margins are tight and employers simply don’t have the ability to dramatically increase pay without possibly driving customers away with higher prices. State and local government have no profits to cut. More money for government employee pay comes at the expense of cutting existing programs or from taxpayers. While Washington bureaucrats dictate the rules for pay, they can’t make revenue magically appear to support these pay increases.
Recently, the NFIB and Ohio General Mike DeWine joined separate lawsuits filed against this rule which is a gross violation of the Constitution and steps far outside the bounds Congress set for governing overtime pay. By wading into issues of pay for state employees, the federal government is making fundamental decisions and overstepping Ohio lawmakers by dictating spending and taxing decisions.
For small businesses, in particular, there is great concern about the future of the overtime rule. Without consulting Congress, the Department of Labor’s new rule creates additional automatic increases every three years, instituted without any comment period, effectively ignoring any reasonable objections, another clear violation of federal laws governing the regulatory process.
The deadline for implementation of the new rule is on the horizon. We hope a federal judge will see the strength of our arguments and stop this rule before it does irreparable harm. If not, in the long run, it is the employers, workers, and taxpayers of Ohio who will suffer.
