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White House weighs overtime rule changes

White House weighs overtime rule changes
© Greg Nash

The White House has some big decisions to make before signing off on the Labor Department’s widely contested rule to expand overtime pay, one of the biggest regulatory initiatives of President Obama’s second term.

Industry and nonprofit groups are pushing back against several aspects of the rule, including the proposed salary maximum for earning overtime pay, the annual adjustment rate for overtime wages and the deadline for businesses to comply.

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The proposed rule from the administration would make it so that anyone earning up to $50,440 per year would be eligible for overtime. The cutoff is now set at $23,660 per year, meaning the rule would more than double the threshold.

Groups have flocked to the White House Office of Information and Regulatory Affairs (OIRA) to ask for last-minute changes to the rule, which was submitted for final review on March 14. The White House office held 22 meetings on the proposal in April, according to its calendar, and groups say more meetings are planned this week. 

Lisa Horn, a spokeswoman for the Partnership to Protect Workplace Opportunity, which met with OIRA on April 22, said the overtime rule would force employers to raise salaries above the proposed $50,440 a year to avoid the additional costs of overtime. She said businesses might also seek to avoid the costs by reclassifying workers from salaried to hourly.

Switching a salaried worker to an hourly employee is a demotion, said Horn, who serves as director of congressional affairs for the Society for Human Resource Management (SHRM). The employee would have to start punching a time clock, cut back on networking events after hours and give up their company smartphone to keep them from checking emails when at home.

“The fact that the overtime threshold is a 113 percent increase is too much too fast,” Horn said. “The agency is moving to the 40th percentile of earnings for all full-time salaried workers when recent increases have only been in the 10th percentile.”

Groups, including the SHRM, have asked the administration to give businesses and nonprofits upward of a year to comply with the rule.

“The proposal suggests a 60-day threshold date,” Horn said. “We’ve all said that’s unworkable. We need some more time to get this implemented.” 

Meanwhile, nonprofits that rely largely on donations say they are already looking at which services to cut.

“The reality of the proposed rule is that it will immediately increase our cost of responding to disasters, which will likely mean less money to spend on services to people in need,” the American Red Cross said in a statement.

Citing anonymous sources close to the deliberations, PoliticoPro reported last week the administration is poised to lower the salary threshold in the rule from $50,000 a year to $47,000 for salaried workers. 

But even if the threshold were lowered by $3,000, businesses say that’s not nearly enough.

“It’s a reduction that’s big enough to allow the White House to say, ‘Hey we listened to employers,’ but it’s too small to make any difference at all.” said Tammy McCutchen, who worked as an administrator in the Labor Department’s Wage and Hour Division during the last major overhaul of the overtime regulations, in 2004.

“What we have to remember is the Fair Labor Standards Act has to apply in every major city and small town in America.”

Jason Surbey, a spokesman for the Labor Department, would not comment on the reported change. 

“Due to where we are in the rule-making process, I can’t comment on that at this time,” he said.

McCutchen, who now works as a labor attorney in Littler Mendelson’s D.C. office, helped the U.S. Chamber of Commerce draft its comments to Labor in opposition to the rule. 

Given the number of legislative days left in this session of Congress, McCutchen is expecting the agency to release the final rule by May 16 to avoid it being overturned by the Congressional Review Act (CRA) under the next president.

Under the CRA, lawmakers have 60 legislative days to pass a resolution overturning a regulation from the administration. If lawmakers are not in session for 60 days before adjourning their final session, the clock resets, and the new Congress is given another 60 days to act.

Because the president must sign a CRA resolution, Republicans could be able to use the CRA successfully if their party wins the White House.

“When you are in a political leadership role in an agency, you don’t assume you are going to win an election,” McCutchen said. “You get everything done so it can’t be reversed.”

The Labor Department received more than 270,000 comments on the rule, and while many were from businesses bemoaning the rule’s possible ramifications, other comments strongly endorsed the move.

Sen. Elizabeth WarrenElizabeth Ann WarrenDemocrats wise to proceed cautiously on immigration Strategist behind Warren's political rise to meet with O'Rourke: report Warren fell for ‘Trump trap’ with DNA test, says progressive MORE (D-Mass.) asked White House officials this week to focus on the multitude of comments from workers in support of the rule.

In a report she released Monday, Warren quoted workers like Chris R. from Millsboro, Del., who said the ability to earn overtime would help him pay his bills on time or get a second job; and Diane R. from Miami Beach, Fla., who said hospital staff would get paid for the 60 hours they work a week. 

“It’s time for us all to listen to those voices,” Warren said in a letter to the White House.

The Economic Policy Institute said the rule would restore a protection that has been missing for some time.

“It’s a very, very simple rule to implement,” said Ross Eisenbrey, vice president of the D.C. think tank. “All it requires is looking at your workforce and seeing how you’re paying overtime. It’s something an automated payroll processing system could do in five minutes or a human resource manager could do in a couple hours.”