Monday, May 23, 2016

The Adverse Affects Of Obama's Salaried Overtime Rule

Set to go into effect on December 1 of this year, the Obama Administration announced a new wage ceiling for the salaried overtime rule under the Fair Labor Standards Act (FLSA).  Under the new ruling, salaried workers making $47,476, who work more than 40 hours in any week, are eligible for time-and-a-half overtime pay. And, the Department of Labor estimates that this will result in 4.2 million workers getting a raise;  or, that's how the media is reporting it.

The reality, is that this new overtime rule will do more damage to jobs and wages than benefit more than 4 million workers.

First of all, like raising the minimum wage, this ruling makes it more expensive to start a business in this country.  It is already extremely difficult for startup businesses to survive. 25% of all new startups fail in the first year and 50% fail in the first four years.

Secondly, applicable workers might find themselves simply reclassified as hourly and will then find themselves punching a time clock.  As a result, they will lose any bonus pay and surely lose work hour flexibility that they may have enjoyed as a salaried employee.  For example, as any hourly worker, they could be docked for coming in late, or for taking a longer lunch hour in order to get other things done.

In addition, people at or near the new ceiling may see their incomes raised to slightly above the ceiling so that companies can avoid the overtime rule.

Some may see their jobs converted to outsourced, freelance positions. A disturbing trend as employers try to sidestep regulations like this and ObamaCare.  And, those close to the ceiling may get a little bump in pay in order to avoid the overtime rule all together.  Currently, 53 million workers are contract laborers; up from just 10 million a decade ago.

However, the biggest losers will be the those making more than $47,476 a year.  The money that will be paid for more overtime will reduce the amount of money for wage increases for those working above the overtime pay ceiling.

Lastly, no one who makes $47,476 should think they will automatically be eligible for overtime pay.  This is because, under FLSA overtime rules, there are a number of exemptions.  For example, it does not apply to outside personnel such as sales persons.  Nor, does it apply to someone who:
  1. regularly supervises two or more other employees, and also
  2. has management as the primary duty of the position, and also,
  3. has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).
Once again, the tampering with the workforce by the Obama Administration will result in the continued weakening of the middle class by focusing in on lower level wages.  A country cannot be strong without a strong middle class.  

Also understand that the President fears fallout from this change.  That is the reason for the odd implementation date of December 1.  It insures that it is after the November elections but, still close enough to have positive electoral impact.   A more normal effective date would have been January 1, 2017.


Millions more Americans to be eligible for overtime pay: 

Exempt and not Exempt Workers: Fair Labor Standards Act (FLSA): 

53 million Americans are freelancing, new survey finds: 

Paying Bonuses Instead of Salary Increases: 

Startup Business Failure Rate By Industry – Statistic Brain:

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