Lawmakers split into fierce partisan camps Thursday over the impact of the Labor Department’s new overtime rule, with Republicans highlighting its negative impact on nonprofits and universities while Democrats rallied to the rule’s defense.
The skirmishing presaged a larger battle expected later this year when the Republican majority will attempt to roll back the department’s rule.
The GOP held a hearing before the House Education and the Workforce Committee where representatives of the University of Kansas and the New Hampshire branch of the nonprofit charitable group Easter Seals described the budgetary strain the rule was creating for them. The sudden spike in labor costs would force both to cut back on key services, they said.
“The final overtime rule will cost Easter Seals NH approximately $265,000 to raise certain exempts’ salaries above the new salary threshold. We have also budgeted $162,400 annually for estimated overtime and on-call costs. In other words, in the first year alone, this overtime rule will cost Easter Seals NH $427,000,” said Tina Sharby, the charity’s chief human resources officer.
Committee Chairman John Kline, R-Minn., said the Obama administration had blown an opportunity to create a common-sense, bipartisan solution. “The department chose once again to take an extreme, partisan approach that will hurt the very people they claim they want to help. This rule will disrupt the lives of countless individuals and do nothing to remove the regulatory landmines that are harmful to workers and employers,” he said.
Democrats countered by inviting Labor Secretary Tom Perez to a Capitol Hill press conference to defend the rule. Perez said the idea that the rule’s compliance costs outweighed its benefits was “a premise I cannot accept” and said that he heard from numerous nonprofits that backed the rule. “They understand that lifting workers means lifting your own wages,” Perez said.
Ordinarily, federal law says employees must be paid time and a half once they work more than 40 hours in a week. However, businesses may exempt workers from the requirement if their duties are “managerial” in nature. Prior to last month, one of the requirements was that the worker had to make at least $23,000 annually before he or she could be exempted. Under the new rule, the minimum is set at more than $47,000. The change, announced by Perez last month, will take effect Dec. 1. Because it is an administrative reinterpretation of an existing rule, the change does not require congressional approval.
The administration has characterized it as a long-overdue update to a rule that has been abused by employers. The change would result in workers either getting more pay or more time off, officials have argued.
Business groups have staunchly opposed the rule, saying the higher labor costs will force them to cut back hours or eliminate positions entirely. Senate Republicans announced Wednesday that they will try to roll back the rule later this year under the Congressional Review Act, an extreme long shot. The president can veto CRA bills and the Republicans have only 44 co-sponsors for theirs, 23 short of the amount needed to override a veto.
To make the case against the rule, Republicans have focused on its impact on nonprofit groups and college and universities, both of which have long relied on workers exempt from overtime requirements.
“If each employee transitioned to a non-exempt status worked just five hours of overtime a week, the [compliance] cost to the university would be $2.3 million [annually],” said Michael Rounds, associate vice provost for human resources management at the University of Kansas.
Committee Democrats pushed back by arguing that that cost was small relative to the university’s total budget, which Rounds put at $1 billion. At least four Democrats pointed out that University of Kansas Basketball Coach Bill Self is paid $3 million annually, forcing Rounds to repeatedly point out that the state university, does not actually pay the coach’s salary. Self’s salary is paid with private dollars.
