The U.S. Labor Department, at the direction of the White House, on Wednesday released details of new rules that double the threshold at which a private-sector employee becomes ineligible for overtime to $47,476 annually, or $913 per week, from roughly half that amount. The rule, which is slated to take effect Dec. 1, effectively adds 4.2 million workers to the pool that must be 1.5 times their hourly wage for each hour worked beyond 40 hours a week.
The rule also raises the threshold for Highly Compensated Employees from $100,000 annually to $134,004 annually.
Reaction from groups representing home builders was swift and fierce.
“The sheer arrogance displayed by the Department of Labor in failing to heed the concerns of the nation’s small business community will result in severe repercussions that will harm workers, small businesses, housing affordability, job growth and the economy," said Ed Brady, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill.
“DOL’s overtime rule will rob employers of needed flexibility and employees of career advancement avenues, and it will have a disruptive effect on the construction industry as a whole,” said Kristen Swearingen, vp of legislative and political affairs for Associated Builders and Contractors.
The rule is opposed nearly uniformly by groups representing small businesses, which see the issue as drenched in politics and a gambit by a Democrat White House to back Republicans into a corner during an election year. In anticipation of the imposition of the rule, a bill to temporarily quash the rule was introduced in Congress in March, in the House by Tim Walberg (R-MI) and and John Kline (R-MN) and in the Senate by Tim Scott (R-SC) and Senator Lamar Alexander (R-TN). Called the Protecting Workplace Advancement and Opportunity Act, the bill would halt the Labor Department from imposing the rule until it conducted a lengthy review of its impact on small businesses and the economy. Its effect would be to push the issue beyond the end of the Obama presidency, when Republicans hope a GOP president could permanently quash the rules before they could take effect.
The bill was ardently supported by the builder groups.
In his statement Wednesday, NAHB's Brady said, "“Congress can play a constructive role by moving quickly to pass the Protecting Workplace Advancement and Opportunity Act, legislation that would force the agency to withdraw this rule until it has considered the effects it would have on small businesses, consumers, workers and the economy.”
ABC has supported the bill since its introduction, urging members to push their elected representatives to get behind the legislation.
The Labor Department published the rule online Wednesday. In its post, the Department said:
- The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
- Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
Said NAHB's Brady, "“By radically doubling the current overtime salary limit of $23,660 to $47,476, this blatant regulatory overreach will essentially hurt many of the workers the rule was meant to help. Small business owners across the land, including the vast majority of home building firms, will be forced to scale back on pay and benefits, as well as cutting workers’ hours in order to avoid overtime requirements and remain in business."
ABC's Swearingen, likewise, pointed out the potential harm the rule could inflict on workers. “The unprecedented increase in the salary threshold may force some contractors to consider switching certain employees from salaried positions to hourly," she said in a statement. "This change may deprive employees of autonomy in their work schedules and may be perceived as a demotion to employees."
Scott issued a statement as well: “The Obama Administration’s new overtime rule will have swift and damaging impacts on hard working American families, as well as small businesses, non-profits and colleges and universities,” said Senator Tim Scott, a member of the Senate Labor Committee. “This president and his administration continue to disregard the full economic realities of their policies, and their lack of foresight is clearly evident in the final overtime rule...Bureaucrats in Washington cannot create jobs, but they certainly can destroy them."