During the State of the Union, President Obama promised to use his pen to enact policy changes, but despite that promise, today’s action to change overtime pay came as a surprise. It was never on a list of regulations or rules that might come out, an agenda – this almost seems to have been done on a political whim. Regardless, bad policy is bad policy no matter how carefully it may have been considered – and today’s announcement is bad news for manufacturers looking to grow, invest and create jobs. In a Presidential Memorandum, the Secretary of Labor is directed to alter the current rules in which an employee is to receive overtime pay as set forth under the Fair Labor Standards Act (FLSA). The current rules for overtime pay lay out a test based on a threshold weekly salary (currently set at $455/week), as well as whether an employee may perform duties in a certain job category (management, supervisory), which then would exempt the employee from overtime pay. While we have yet to see the details of the proposal, it is inevitable that these new rules will create more costs for employers, rather than help create more jobs.
This move by the Administration should not be surprising, however, since the President has said he would do what he can on his own to raise wages. He has already raised the minimum wage for federal contractors, but if Congress remains relatively the same, it is unlikely a minimum wage bill will pass in its current form. What the Administration fails to realize, however, is that changing the rules for overtime pay, will not achieve the end game of creating more jobs. In fact these new rules will have the opposite effect since employers will have to pull resources away from new jobs. Although we lack any specificity on this latest set of bad ideas, we know from the outset that the new rules will only create more hurdles for growth and job creation.
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