Another Misguided Rule From the Department of Labor (U.S. Rep. French Hill Commentary)

French Hill

Here is something no one wants to hear during one of the slowest periods of economic growth since the Second World War: businesses in Arkansas and across the country are set to be hit with an aggressive 113 percent increase in the salary threshold for overtime pay.

While the president touts this extension of overtime pay for salaried workers making up to $50,440 (current threshold is $23,660 annually) as a victory for the middle class in America, the rhetoric does not match the reality, and unless Congress acts, this action will threaten jobs and limit available opportunities for advancement in the workplace for millions of hardworking Americans.

In the nearly eight decades since the enactment of the Fair Labor Standards Act, a proposal of the impact and breadth of the president’s to drastically increase the salary threshold for exempting workers from overtime is unprecedented.

According to the National Federal of Independent Businesses, an estimated 40 percent of small businesses will be affected by this rule. While the president and U.S. Department of Labor Secretary Thomas Perez believe this rule will raise salaries for many workers, the reality is that small businesses will be forced to change many in their workforce from salaried to hourly employees and prohibit working overtime, removing flexibility and eliminating opportunities for advancement in the workplace.

At a time when our nation’s businesses and employers are struggling to deal with multiple federal mandates and regulations, any changes to overtime requirements must be done in a way that allows businesses to adjust without harming employees and limiting their opportunities. 

The rule affects not only our small businesses, but cities, towns, universities and colleges in Arkansas and across the country. They, along with organizations such as the College and University Professional Association, have raised concerns about the costs that will be incurred by this federal mandate and likely passed along to students in the form of increased tuition and taxpayers.

The NFIB also expressed opposition to the rule, stating concerns that worker morale would decline, flexibility for work hours would be diminished, and fewer salaried and managerial positions would remain available for employees.   

There are also concerns that Labor Department lacks the statutory authority to automatically increase the salary level annually as proposed under the new rule and that each salary increase should be made through public notice and comment to comply with current law. 

The “one-size-fits-all” approach, which has been the modus operandi of this administration, must again be prevented. 

Over the past year, I have heard from businesses and universities in Arkansas that face devastating impacts to their operations if this rule is implemented. I have urged the DOL to go back to the drawing board, abandon its current plan for this ill-advised rule, and work with industry and our states to devise a measured approach to modernizing our overtime rules and regulations.

In his letter to me last August, Richard Davies, the then-executive director of the Arkansas Department of Parks and Tourism, wrote: “The Department of Labor’s proposal is extremely shortsighted, goes against common sense, and will be counter-productive. After seeing how much such a change would negatively affect our own rather modest-sized agency, I shudder to think how this rule will adversely impact the thousands upon thousands of other businesses and organizations across the country. I urge you to help defeat this faulty exercise which, in my view, is a threat to the economy.”

Davies is not alone: more than 250,000 comments were submitted to DOL regarding the proposed rule, and many of these highlighted similar concerns over the lack of sound economic analysis and failure to carefully consider different industries and geographic regions in the United States. 

Yet, the DOL intends to move forward with the proposed rule, which is expected to be released in July. There are many reasons to oppose this plan and support a new administration that works with Congress on key issues related to growing our economy. One of the most underrated aspects of a new administration would be Secretary Perez’s no longer being at the helm of Labor Department. There are few people in Washington with a worse record on the economy than Secretary Perez. 

While the overtime rule signifies his most recent attempt at putting his hands around the throat of the private sector, this unfortunately speaks to a much larger trend. 

Earlier this year, the DOL began using an interpretation of Fair Labor Standards Act to issue guidance on joint employment that would harm our nation’s franchisors and franchisees. The DOL is also responsible for the impending Fiduciary Rule that will adversely affect those trying to save for retirement by limiting consumer choice and access to sound financial advice while increasing costs, particularly for lower income Americans trying to save for their retirements — exactly the opposite of what would benefit consumers.

The latter is part of the administration’s “War on Savings,” which included initial plans to scrap the 529 college savings plans, a useful tool used by many middle- and lower-income American families to help pay for college.   

Just like Congress was able to defeat the administration’s plan to eliminate 529s, I believe we can find a solution to this misguided and self-created overtime rule dilemma. That is why I recently cosponsored the “Protecting Workplace Advancement and Opportunity Act” (HR 4773).

This bill will ensure a modern, flexible workplace for hardworking Americans and allow U.S. businesses to thrive while preventing a massive overreach by the federal government. I look forward to working with my colleagues to pass this bill and reduce the regulatory burden on our nation’s job creators.

(French Hill represents the 2nd Congressional District of Arkansas in the U.S. House of Representatives.)