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Friday, 04 November 2016 02:33

The Outcome of the Presidential Election will Determine the Breadth of the Overtime Rule

THE OVERTIME RULE

In 2014, President Obama tasked the Secretary of Labor to make changes to the overtime regulations in the Fair Labor Standards Act (FLSA). The goal was to align the rule with the original intent behind the FLSA and to make the rule easier for employers and employees to understand and apply. The final rule will become effective on December 1, 2016. The rule will raise the salary threshold to $47,476, and automatically increase the threshold every three years.

IMPACT ON SMALL BUSINESSES

Small businesses are facing concerns for what might happen to their employees come December 1, 2016. Many small restaurants and shops will not have the ability to raise entry-level manager salaries above the new threshold or to pay them overtime. Small businesses have very few options when it comes to offsetting heightened costs. This could lead to cutting jobs or hiring lower-skilled workers. Small businesses will also have higher costs when the Overtime Rule comes into play since they will need to designate resources to carefully monitor the hours employees work.

In addition to the heightened costs, current managers may lose some of the advantages they currently enjoy, such as flexible schedules, benefits, and promotions. Not to mention, once the businesses raise the threshold for this level of employees, it may cause a domino effect of pressure for raises farther up in the business hierarchy.

OPPOSING VIEWS BY PRESIDENTIAL CANDIDATES

The outcome of the presidential election could have a strong impact on the Overtime Rule.

The Republican platform has not specifically addressed the Overtime Rule. However, Republican presidential candidate Donald Trump told an online news outlet on August 12 that he favors small-business exemption from the rule. “We have to address the issues of over-taxation and over-regulation and the lack of access to credit markets to get our small business owners thriving again," Trump said. “Rolling back the overtime regulation is just one example of the many regulations that need to be addressed to do that. We would love to see a delay or a carve-out of sorts for our small business owners." Vice president of the Economic Policy Institute, Ross Eisenbrey, believes this exemption would “deny overtime protection to half the U.S. workforce…” This strikes Eisenbery as a “…bad thing to do.” However, Jack Mozolom, media director for the National Federation of Independent Business (NFIB) disagreed, stating that he believes Trump “acknowledges the impact of the rule on small businesses.”

On the opposite end, the Democratic 2016 platform has spoken out, saying that “We will defend President Obama’s overtime rule, which protects millions of workers by paying them fairly for their hard work.” Similarly, Democratic presidential candidate Hillary Clinton threw her support behind the Overtime Rule as soon as it was released, stating “I applaud President Obama and Secretary of Labor Perez for these overtime rules, which will lift up workers nationwide and help get incomes rising again for working families.

WHAT DOES THIS MEAN FOR EMPLOYERS?

The anticipated enforcement of the Overtime Rule that is set to begin on December 1, 2016, may or may not have as strong of an effect as President Obama had intended depending on the winner of the 2016 presidential election. If Hillary Clinton wins, it is likely the Overtime Rule will be just as impactful as President Obama had intended, and will have a substantial impact on small business. If Donald Trump wins, the outcome is much more uncertain, but there may be some chance of him pushing for a small business exemption, favoring small employers, but negatively impacting employees by denying them overtime protection.

For more information about this alert or another employment law topic please contact Attorney Peter Culp with the Dempsey Law Firm.

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