The most important thing to know about the Obama administration’s new overtime rule is that it has now disrupted or voided the arrangements 73,000 Coloradans had with their employers.
Arrangements, mutually beneficial to employer and employee alike, that accommodated individual lifestyles, family commitments, and emergency needs. The 73,000 number comes from the U.S. Department of Labor and is part of the 4.2 million nationally that DOL claims are recipients of its warmly embracing beneficence.
Would that life worked so simply. It is worth noting that to explain its new rule, DOL used two cartoon characters, Sam and Mattie, not two human beings. Sam, the voice-over explains, will “have more of his own time” to do the things he likes.
“Sure, you might not make more money, but think of all the free time you’ll have to look for a second job,” noted Noah Rothman in Commentary magazine with bull’s-eye irony.
The new rule affects salaried employees, not hourly paid employees. Hourly employees are paid overtime no matter what their annual pay. But a certain class of employee, white-collar workers performing supervisory, managerial, or administrative duties, are exempt from overtime pay after a $23,660 a year threshold. The threshold increases to $47,476 on December 1, and it needs no congressional approval to take effect.
If you think this increase only fair, think again.
“Entry-level management positions are going to disappear, and those employees will fall back to hourly jobs,” said Juanita Duggan, president and CEO of the National Federation of Independent Business. “Obviously, that means higher costs for millions of small businesses regardless of whether they’re making more sales, generating more revenue, or dealing with other rising expenses. Many are struggling now, and they’ll have to make tough choices that might affect the very same workers the Department of Labor thinks it’s helping.”
Added NFIB’s senior legal counsel, Beth Milito, “Struggling small-business owners can’t afford to pay more in overtime pay just because the Department of Labor says they should. Businesses can only afford more in payroll if they increase revenue, something the government is powerless to make happen. Most small-business owners will have to limit employees’ hours and career opportunities.”
But then Duggan and Milito would say that, wouldn’t they? That is the tone taken by The New York Times in an editorial praising the new overtime rule. “They [employer groups] have said that employers will cut base pay if forced to pay overtime, but that appears to be an idle threat.”
Had, however, the Times editorial board read more than its section that day, it would have come across a story by their reporter, Sarah Max, who analyzed the options available to employers, “They [employers] could even cut the base salaries of those who regularly work more than 40 hours …”
Across the political divide from the Times, The Wall Street Journal put it right on the money, “The irony is that salaried workers will enjoy less personal flexibility once they have to record their hours, and those who become hourly wage hands will receive even less.”
Indeed, as business owner Kelli Glasser put it in Max’s Times report, “If somebody needs to pick up a sick kid or go to a doctor’s appointment, we let them do it because we know that at some point they’ll make up for it. Once you start tracking hours, all that changes.” Added businessman Lior Rachmany in the same article, “I think you get a better product when people are paid a salary. When a person knows there is a task to done, it will get done, not on the clock.” Rachmany, reports Max, “said he would probably end up hiring more entry-level employees and minimizing overtime pay for his affected salaried employees.”
Finding real-life portrayers for DOL’s overtime script after December 1 will be a most difficult casting call. Watch for Sam and Mattie the sequel.
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