Industry groups reacted angrily Wednesday to the Obama administration’s new rule requiring companies to pay more overtime, saying it will hurt small businesses, lower the morale of salaried workers and discourage innovation.
The National Association of Manufacturers called the rule “the latest in what has been a deluge of regulations from this administration that are fundamentally altering the manufacturing workforce and negatively impacting companies and business owners.”
“This regulation creates barriers to opportunity, severely limiting flexibility and dramatically increasing red tape, especially for small manufacturers who cannot afford the burdens of a 99 percent salary increase for management employees who are exempt from overtime pay,” said NAM Vice President Rosario Palmieri. “Even worse, the administration has also required there to be future automatic increases, which creates uncertainty in planning for future years.”
The Labor Department regulation will raise the salary threshold for receiving overtime from $23,660 to $47,476 a year, or from $455 to $913 a week. Currently, salaried employees who are paid more than $455 a week can be deemed “managers” even if they have little in the way of supervisory duties and therefore ineligible to be paid at higher overtime rates if they work more than 40 hours per week.
Ms. Palmieri said what the administration portrays as a pay raise for 4.2 million workers could limit options “for many who strive to be part of management.”
“Time and resources that could be spent on creating jobs and opportunity will now be used in efforts to comply with this rule,” he said. “If the goal is to fatigue manufacturers and create disincentives to opportunity, then mission accomplished.”
The National Federation of Independent Business said higher labor costs inevitably will hurt the workforce.
“Entry-level management positions are going to disappear and those employees will fall back into hourly jobs,” said NFIB President and CEO Juanita Duggan. “Small businesses everywhere will be affected, but most of the damage will occur in places where the cost of living and the wage scale is much lower than it is in Washington, DC, or Manhattan, or San Francisco.”
Gary Shapiro, president and CEO of the Consumer Technology Association, said the rule “will compromise the potential of our best and brightest innovators, crippling the very startups that are central to America’s job growth and global competitiveness.”
“Say goodbye to teams of young minds pulling all nighters to create something new,” Mr. Shapiro said. “This attack on American entrepreneurship — drafted by Washington bureaucrats who have never worked at a startup — discourages startups and innovation.”
Asian American Hotel Owners Association President and CEO Chip Rogers said the new regulation “hurts the very workers the administration purports to help.”
“More than half of hotel managers start in entry-level positions like housekeepers, desk clerks, or valets,” Mr. Rogers said. “Successive promotions into management will be significantly harder under this rule. Employee morale will also take a big hit as salaried workers are moved back to hourly positions, which many will take as a demotion.”
The rule, which makes 4.2 million fewer workers exempt from overtime rules under the “manager” exception, takes effect Dec. 1.
Labor unions and advocacy groups are praising the rule.
“For too long, too many workers have not been able to qualify for overtime, forcing many families to struggle financially and pushing some into poverty,” said Kristin Rowe-Finkbeiner, CEO and executive director of MomsRising.org. “They have been missing out on the pay that could make the difference between being able to put food on the table and sending kids to bed hungry.”
The administration said it will raise middle-class wages, on average, about $1.2 billion per year.
“Americans have spent too long working long hours and getting less in return,” President Obama said. “If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones.”
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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