President Obama is expected to issue an executive order Thursday to expand overtime to millions of workers considered to be “executive or professional” employees.
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Currently, the law says businesses must pay overtime to salaried employees making less than $455 per week. The new rule would raise that threshold, and expand overtime to workers currently classified as executive or managerial employees.
The AFL-CIO is applauding the anticipated move, saying the proposal could help raise wages and create jobs. Business groups, however, say it would be a job killer.
“In this case, intrusive government regulation on labor will diminish job creation, investment in labor saving capital, and for businesses able to do so, increased incentives to shift operations out of the country,” says Small Business & Entrepreneurship Council president Karen Kerrigan. "The cumulative impact of the President's policies is becoming unbearable for many small businesses.”
Kerrigan says the move may be the straw that breaks the camel’s back, in a climate where business owners already say they are over-taxed and over-regulated.
“More federal intrusion dictating the terms of small business decision-making when it comes to their workforce won't create more jobs or help firms become more profitable so they can pay their employees more,” says Karen Kerrigan.
The National Federation of Independent Business says overtime expansion, coming on the heels of the president’s pledge to raise the minimum wage, is a one-two punch for small businesses.
“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 health-care costs, as well as ever-growing, costly and unwieldy regulations,” says Eric Reller, a spokesman for the NFIB.
And while The New York Times reports that the White House’s plan is directed at corporate giants, small business groups say it could mean trouble for Main St.
“While we’re still looking into what this announcement will mean for America’s small-business owners, it’s important to note that small firms haven’t been experiencing windfall profits in recent years that large firms have—quite the opposite, in fact. So, while an effort to level the playing field certainly sounds reasonable, it could be very problematic for small firms,” says National Small Business Association spokeswoman Molly Day.
Business Owners Weigh In
Melinda Emerson, owner of marketing firm Quintessence Group and a small business consultant, says expanding overtime pay could make business owners hyper-vigilant when it comes to employee hours.
“Employees who get part time will stay part time, and employers won’t extend them to full time or salary hours. I don’t know if it will affect long term growth, but it could affect long term hiring and the way existing employees get treated,” says Emerson.
Scott Griffiths, the owner of 18|8 Fine Men’s Salon, says the president’s proposals have brought nothing but bad news to small businesses. 18|8 Fine Men’s Salon is a franchise business, with 120 locations in development.
“This administration has provided virtually no support for small business … It’s very, very upsetting,” says Griffiths.
Griffiths says the rule could hurt both employers and employees.
“It is a problem. We want to be able to accommodate employees who want to work more than 8 hours, and that cripples us and handicaps us. The fact that we have to control hours is problematic. I don’t like having to run by business like that,” says Griffiths.