By Nick Novak
When will enough be enough for the Obama administration? It seems as if every time a business owner turns around these days, there is another federal rule change that is going to be detrimental to their bottom line.
From unruly EPA regulations that are going to hamper the manufacturing and energy industries, to the new OSHA rule on silica dust that will be harmful to construction companies, folks in the private sector are truly hurting.
And now, private businesses from all segments and every part of the country are going to face regulations that will most likely increase costs and reduce productivity. Thanks to a final rule that was announced last month by President Obama’s administration, the threshold for paying overtime to salaried employees is going to double.
Since 2004, so-called “white-collar,” salaried employees have not been guaranteed overtime as long as they earn more than $23,660 and meet certain tests regarding their job duties. However, starting Dec. 1, the federal government will force employers to pay overtime to currently exempt workers who earn a salary of up to $47,476 a year.
While the White House touts this change as a way to, “boost wages for workers by $12 billion over the next 10 years,” it fails to mention that this has to be paid for by the private sector. Also conveniently overlooked is the fact that a large portion of the needed money will have to come from small businesses that operate on thin profit margins.
Since the Department of Labor proposed this new rule, Associated Builders and Contractors has been a strong opponent of it. Last fall, the ABC submitted comments to the labor department urging officials there to reconsider the change. More than 900 ABC members signed their names as opponents.
Following the release of the final rule, Kristen Swearingen, ABC vice president of legislative and political affairs, clearly stated why it will have such damaging consequences for the construction industry.
“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,” she said. “The unprecedented increase in the salary threshold may force some contractors to consider switching certain employees from salaried positions to hourly. This change may deprive employees of autonomy in their work schedules and may be perceived as a demotion to employees.”
To comply with the final rule, many contractors who want to avoid heavy overtime expenses will have to give significant raises to some employees. Either that, or they will have to limit how much their employees can be on the job.
In either case, this will make it more difficult to deliver projects in the most efficient way possible.
If contractors increase some workers’ pay, they will most likely have to give a raise to everyone across the board. While some large contractors may be able to eat the increased cost of labor, many will have to reduce the size of their workforce to make up for the arbitrary salary increases.
On the other hand, some contractors may choose to limit the amount of hours each employee can work. If salaried employees who had freely chosen previously to work more than 40 hours a week are now to be sent home after five, eight-hour days, many projects will end up taking longer to complete. As every contractor knows, projects often have tight schedules and the 40-hour workweek may not provide enough time to the job done by deadline.
Simply put, the new overtime rule does nothing to benefit workers or their employers. It is nothing more than yet another regulation that will drive up the cost of doing business while adding no additional benefit to the economy.
Luckily, contractors and others in the private sector have an ally in House Speaker Paul Ryan, who has vowed to fight the new rule.
“By mandating overtime pay at a much higher salary threshold, many small businesses and non-profits will simply be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether,” Ryan said after the rule was released. “For the sake of his own political legacy, President Obama is rushing through regulations — like the overtime rule — that will cause people to lose their livelihoods. We are committed to fighting this rule and the many others that would be an absolute disaster for our economy.”
Our hope now is that current legal challengers of the final rule will prevail before it does unfortunate damage to the construction industry and the economy as a whole.