WASHINGTON – On Thursday, the House Small Business Subcommittee on Investigations, Oversight and Regulations delved into a labor issue important to convenience store owners and operators: proposed updates to the thresholds under which employees must be paid overtime.
In July, the Department of Labor (DOL) proposed raising the salary threshold under which employees must be paid overtime rates for hours worked. Currently, that salary threshold is $455 per week or $23,660 per year. The proposed DOL rule would dramatically increase that amount to the 40th percentile of weekly earnings for full-time salaried workers—approximately $970 per week or $50,440 annually. The threshold would then automatically adjust to stay at that 40th percentile number as wages change over time.
The hearing, entitled “The Consequences of DOL’s One-Size-Fits-All Overtime Rule for Small Businesses and Their Employees,” examined the proposed DOL rule and its potentially negative impacts on small businesses. Subcommittee Chairman Cresent Hardy (R-NV) stated that the proposed rule “increases costs for small businesses and reduces flexibility for American workers.” Further, Chairman Hardy stated that the proposed rule, if finalized as written, would “make it harder for small businesses to grow and create jobs.”
Lawmakers heard testimony from several small business owners in the restaurant, retail and homebuilding industries. Those witnesses emphasized the difficulties their businesses would have implementing such a significant wage hike. Specifically, they noted that it would likely cause increased costs to consumers and result in current salaried employees being converted to hourly positions. The hearing also heard testimony from an academic researcher who defended the DOL’s proposal—Ross Eisenbrey, vice president of the Economic Policy Institute—who testified that the current overtime standards are not adequately protecting workers and that an update in the threshold would improve workers’ work-life balances.
Republicans at the hearing were generally not supportive of the DOL’s proposed rule, noting that the overtime update could add significant labor costs for small businesses. While most Democrats defended the proposal, Subcommittee Ranking Member Alma Adams (D-NC) did state that the proposal “will add significant compliance costs and paperwork burdens on small entities,” a fact particularly true for employers located in low-wage regions and in industries operating on low profit margins.
In September, NACS submitted comments on the proposed rule, emphasizing the potential negative effects of the proposal and highlighting significant methodology flaws utilized by DOL. Further, while the DOL did not propose any changes to the existing “duties tests” that governs what duties exempt employees (those who are not eligible for overtime because their salary is above the threshold) are able to perform while remaining overtime exempt, NACS emphasized that the duties test should remain as currently written. A change in the duties test could jeopardize the ability of store managers and assistant managers to effectively operate their stores, where they occasionally perform non-exempt work, such as operating the cash register or restocking shelves.
Like most issues on Capitol Hill, both political parties are divided on this issue, and legislation to block the DOL’s proposal is highly unlikely to be enacted into law. DOL is expected to finalize its rule before President Obama leaves office next year.