Finally, some good news for millions of workers nationwide: a judge in Texas threw out the Obama Administration’s jobs-killing “Overtime Rule.” The rule, promulgated by the Department of Labor back in May of 2016, would have arbitrarily expanded the definition of hourly wage earners, making more employees eligible for time-and-a-half overtime pay, regardless of job-description or the needs of either workers or employees.
This massive change would have applied across almost all industries - including schools, not-for-profits, and small businesses. It has already created turmoil and uncertainty by forcing major changes to time-keeping, job descriptions, and salaries. At first blush, increasing the eligibility for overtime payment may sound like a financial windfall for many, but outside Washington, in the real world, the overtime rule would have inflicted real pain on workers, their families, and our economy.
I laid out these dire consequences in a letter almost a year ago, urging Congress to delay the rule:
For many employees, this rule is a step backwards - knocking salaried workers back to hourly wage earners. Many of these employees worked hard to achieve the status and benefits of exempt employment, like employer-provided health insurance or retirement accounts. In essence, those working to gain new skills in order to advance up the corporate ladder will suddenly find they need to scale even more rungs. The rule is not compatible with the modern workforce. Today’s workers, such as those at a start-up or nonprofit organization, value flexibility and often eagerly work irregular hours on behalf of a vision. Workplace innovations such as telecommuting would be more difficult to implement due to strict tracking and reporting requirements.
With few exemptions (for certain teaching and academic roles), the overtime rule is an overly broad, “one-size-fits-all” policy that doesn’t reflect the dynamic and increasingly diverse roles in today’s economy. Businesses hard-pressed to implement the rule could be forced to re-classify employees, reduce base wages, and transition roles to part-time - forcing many employees into second jobs. For some businesses it may make more sense to ramp up automation and eliminate jobs altogether.
The DOL’s new overtime rule is a costly jobs-killer, and just one more way our burdensome regulatory regime is making the U.S. less competitive in the global marketplace.
Low-skilled, hourly workers would have been disproportionately affected by these changes to current overtime regulations, suffering the most job and wage losses. Small businesses, which generate the vast majority of net new jobs, would have suffered a severe blow. Complying with burdensome new regulations poses an outsized cost for small businesses and organizations.
For instance, at our organization alone, our President Pete Sepp and Office Manager Patrick Gallivan spent an estimated 60 hours merely planning how to comply with the rule for a staff of only 13. This involved researching and investigating new time-tracking systems, implementing new policies, consulting with experts, counsel, and accountants, even imposing limits on how key staff members executed their jobs - largely involving ongoing or long-term projects that don’t easily fit within an hourly-rate framework.
Sepp explained:
In speaking out against this rule, we didn't have look for horror stories -- we were living our own nightmare. Given the responsibility we felt to our own supporters of practicing the fiscal discipline we preach, there was no way we could retain a high-priced HR service to just take over compliance. We faced what every other small employer did: boost salaries to unaffordable levels, or cut back workers' hours and future hiring plans. Because the federal government has effectively limitless resources, the rulemakers never really could grasp this basic dilemma.
It’s appropriate for this ruling to come down on the eve of Labor Day weekend. This is the best kind of win for American workers: one that will help preserve jobs.