Obama’s Overtime ‘Order’ Gets an Overreaction

Should anyone making $23,660 a year be exempt from overtime?

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The Fiscal Times
March 13, 2014

Take a deep breath on the Obama overtime proposal. When The New York Times reported yesterday that President Obama was on the verge of issuing an “executive order” that would dramatically limit the number of employees whom businesses can declare exempt from overtime rules, the uproar was as immediate as it was angry. 

Trade groups like the National Federation of Independent Businesses blasted the move Wednesday morning. 

 “The President’s plan to increase overtime pay demonstrates another anti-business policy – coming on the heels of a proposal to increase the minimum wage, increase the minimum tipped wage, rising healthcare costs, as well as ever-growing, costly and unwieldy regulations,” said NFIB spokesperson Eric Reller. “It is very telling that the Administration could make time to sit down with The New York Times, but not the business community.” 

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Republicans were quick to accuse Obama of more executive overreach. Sen. John McCain (R-AZ) was quoted by The Washington Post complaining, “It’s the phone and the pen again. And again, how does he expect us to work with him when he does these things without even consulting us much less doing it by executive order. It’s another example of his overreach. It just poisons relationships.”

It would be good, though, if everyone could ease off on the hyperventilating, a bit.

Yes, Obama is the executive. And yes, he is apparently poised to “order” Secretary of Labor Thomas Perez to revisit the 10-year-old rules implementing the Fair Labor Standards Act, which in part, governs which employees are exempt from overtime rules.

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However, this is an “executive order” only in the sense that there’s an executive involved, and he’s telling someone who works for him to do something.

What it is decidedly not, is the kind of executive order that has the immediate force of law. Nobody’s paycheck – or payroll – is going to suddenly balloon as a result of this. Obama is directing Perez to begin the tortuous process of updating the rules, a process subject to the Administrative Procedures Act – a point confirmed by a Labor Department spokesperson who wrote via email, “The department will need to engage in the normal federal rulemaking process.”

That means that at minimum, the Labor Department will have to publish a proposed revision to the rules, give affected parties a substantial amount of time to comment on the changes, consider all the comments, and rewrite its proposal in response to legitimate concerns. In practice, such changes often have many other interim steps that can drag on for years.

“I would anticipate it would take probably at least a few years,” said attorney Joel Cohn, who heads the national wage and hour practice at the law firm Akin Gump in Washington. “If you go back to the 2004 revisions to the rules, I believe that took somewhere around two, maybe more years than that.”

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Cohn, who represents employers in labor law cases, said that despite the uproar in Washington, businesses themselves aren’t too worried about the issue yet.

“At this point it’s probably too far off,” he said.

That hasn’t stopped the business lobby from taking a stand on the issue. Marc Freedman, executive director of Labor Law Policy for the U.S. Chamber of Commerce said in a statement, “Changing the rules for overtime eligibility will, just like increasing the minimum wage, make employees more expensive and will force employers to look for ways to cover these increased costs. Similar to minimum wage, these changes in overtime rules will fall most harshly on small and medium sized businesses, who are already trying to figure out the impact of Obamacare on them.

“We understand that the administration is looking for ways to put more money in people's pockets, but the only way to do this is to grow the economy and create more jobs. Adding more burdens to employers will not accomplish that goal.”

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The purpose of the overtime rules is to prevent businesses from wrongly forcing low-wage workers who are on a salary, rather than an hourly wage, to work unpaid overtime. The current rules, which were last updated in 2004, allow businesses to classify certain workers as exempt from overtime if they meet certain requirements, commonly known as the “white collar” exemption.

However, as they currently stand, the rules allow a worker making $23,660 per year – hardly anyone’s idea of a “white-collar” worker – to be ruled ineligible for overtime pay if they work more than 40 hours in a week.

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A longtime reporter on the intersection of the federal government and the private sector, Rob Garver is National Correspondent, based in Washington, D.C. He has written for ProPublica, The New York Times and other publications.