Businesses, workers in limbo as overtime rule faces challenges

Published 6:30 pm Tuesday, October 4, 2016

WASHINGTON – The Obama administration says that millions of Americans, primarily women, are in store for a long-awaited raise.

But for small business owners including Donna Partin, who runs an apartment cleaning service around Lancaster, Pennsylvania, the clock is ticking before she expects a change in overtime rules to heap more burdensome regulations upon her.

Even some non-profits, such as the Oklahoma City YWCA, are concerned that paying more people overtime will force them to “cut back or entirely eliminate” domestic violence programs, according to a letter it sent to the Labor Department.

Bills in Congress, as well as separate lawsuits filed by 21 states and business groups, could slow or stop the change — tactic that the Obama administration criticizes as delaying 4.2 million workers, 55 percent of them women, from being paid for all the hours they work.

However, it’s unclear if there’s enough time to derail the rule, leaving opponents like Partin and workers in limbo.

Sen. James Lanford, R-Okla., who has sponsored three bills to delay, phase in and stop the rule, acknowledged in an interview that passing any of the measures and overriding a veto promised by President Barack Obama before the rule takes effect Dec. 1 could be challenging.

No hearing has been set on the lawsuits filed in a U.S. district court in Texas, and it’s unknown if the court will take up the case in time.

The rule, announced by the Labor Department on July 6, updates national labor laws that the Obama administration says have become weakened and out of date.

The Fair Labor Standards Act requires many hourly workers get paid overtime if they work more than 40 hours per week. Salaried workers who perform some managerial, administrative or professional duties and make at least $455 per week are exempted from the requirement.

The wage threshold hasn’t changed since 2004. As wages and costs of living have gone up, people who should be getting overtime pay are not, say proponents of the change including Ross Eisenbrey, vice president of the progressive Economic Policy Institute.

The number of workers who are guaranteed overtime pay has dropped from nearly 12 million in 1979 to 3.5 million this year, Eisenbrey told a Senate committee in May.

Under the new rules, most workers who make $47,476 per year or less will be eligible for time-and-a-half when they work more than 40 hours per week. The threshold is now $23,660.

Eisenbrey called the 1938 labor law the “the single most family-friendly law ever passed in the United States.” Without it, he said, more people would be working more than 40 hours a week for free.

“Everyone claims to care about work–life or work–family balance, but for many employers, it’s just talk, just as it was 75 years ago,” he told the Senate’s Committee on Small Business and Entrepreneurship.

But, for Partin’s apartment cleaning service, the change will actually hurt one of her office managers who would be guaranteed overtime under the new rule, she said.

Right now the office manager gets a salary and can take off to run an errand — no questions asked.

“I don’t care if she works 5 hours a week or 50 hours a week, if she gets her work done,” Partin said.

But in order to comply with the law, Partin will have to pay the office manager hourly and start tracking what she’s doing.

“She’s going to have to punch a clock. … No more personal errands. No going over 40 hours,” she said.

The National Federation of Independent Business – as well as trade associations for hotels, restaurants and retailers – say many small businesses will have similar problems.

“The feedback we’re getting is one of frustration,” said Neil Lesher, legislative director for the Pennsylvania chapter of the National Federation of Independent Business, a small business group.

When the rule was announced, he said, “panic set it for small businesses.”

“They don’t have an HR department or a payroll administrator. It’s just another regulatory burden they have to wade through instead of spending their time growing their business,” he said.

Kevin Kuhlman, the group’s national legislative affairs director, said in an interview that the new rules deliver a “death by a thousand cuts.”

“The accumulation of so many new mandates through executive authority is too much to bear,” he said.

Lankford said, “I’m incredibly frustrated.”

“It seems like the administration wanted to do this,” he said. “Even if it damages non-profits, and municipal governments, they’re determined to do this.”

The National Federation of Independent Business and other business groups support a bill by Lankford to delay the rule for six months.

A number of national non-profit groups, including YWCA USA, wrote the Labor Department with “tempered” support for the rule. While it would help some of those whom they serve, the groups asked for an extension to address the financial impact.

The main idea is to give businesses more time to figure out what to do. Kuhlman said a delay also allows a new administration to look at the issue “with fresh eyes.”

Republican presidential candidate Donald Trump opposes the rule, while Democrat Hillary Clinton supports it.

The court challenge filed by Texas, Oklahoma and 19 other states, meanwhile, argues that the rule would unconstitutionally mandate how states and municipal governments spend their money because they would have to pay more employees overtime.

A separate suit filed by the National Federation of Independent Business and 50 other business groups alleges that the Labor Department went beyond its authority.

Labor Secretary Thomas Perez, however, said in July the bills will delay extending overtime to more people. “American workers have waited long enough for a fair day’s pay for a long day’s work,” he said.

Perez also called the lawsuits a “partisan” attempt to help “the same interests that have stood in the way of middle-class Americans getting paid when they work extra” to continue “their obstructionist tactics.”

Kery Murakami is the Washington, D.C. reporter for CNHI’s newspapers and websites. Reach him at kmurakami@cnhi.com