Small Business

New overtime regulations to hit Main Street

Overtime regulations to hit Main Street

As advocates work to raise the federal minimum wage, the Obama Administration is taking action where it can to fight income inequality. President Barack Obama late Monday introduced a proposal to extend overtime payment to more white-collar workers.

Obama unveiled his plan to extend overtime protections to nearly 5 million workers in 2016. He made the announcement in a blog post on the Huffington Post.

The move would cover most salaried workers, who make up to $50,400 a year. Workers earning $23,660 or less now qualify for overtime. The proposal would raise that level to include more workers.

But just like the minimum wage, critics argue Main Street would bit hit hard by costs related to overtime, and that hiring and expansion plans would have to be postponed. Supporters of more overtime pay argue the plan woujld put more cash in workers' wallets, and spark spending.

The fact that Obama has shifted his focus to overtime pay does not mean the fight for $15 an hour is any less prominent, say advocates working for higher wages. "This is just another policy to bring attention to the conditions of working people," said Judy Conti, advocacy group the National Employment Law Project's Federal Advocacy Coordinator. "It continues to put the emphasis on the things we can do to make jobs better for people and create a working economy."

The current federal minimum wage is $7.25 an hour.

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Beyond smaller employers, some of America's largest businesses already have raised wages above $7.25 an hour, the federal minimum.

The Gap announced hikes for workers in February 2014, while Wal-Mart and TJX Companies announced raises for workers in February this year. Target followed suit, announcing it would be boosting wages. McDonald's in April said it was raising wages for workers at store owned-locations. Even Facebook joined the fray in May, announcing wage hikes for the vendors and contractors it works with.

"We've always thought a federal $12 by 2020 was reasonable," said Holly Sklar, chief executive of Business for a Fair Minimum Wage, an advocacy group. Congressional democrats are pushing for $12 an hour, while fast food workers are fighting for $15 an hour.

Sklar added the fight will heat up come 2016. "In a way, these moves show that and add pressure to raise the federal wage floor," she said.

President Barack Obama announces a change in U.S. policy in the Roosevelt Room at the White House in Washington June 24, 2015.
Jonathan Ernst | Reuters

The overtime proposal is scheduled to be formally introduced Thursday in Wisconsin. President Obama, in the blog post, said the proposal is "good for workers who want fair pay, and it's good for business owners who are already paying their employees what they deserve—since those who are doing right by their employees are undercut by competitors who aren't."

Both sides gear up for fight

The conservative lobbying group the National Federation of Independent Business said in a release the overtime move would make it harder for small employers to promote managers, as the current rules exempt managers making more than $23,660 a year. And with the new rule increasing that threshold, more employees would be eligible, making them less apt to promote workers to managers.

"That's a very big expense for small restaurants and retailers and the businesses that will be hit hardest are in parts of the country where the cost of living is low," said NFIB Senior Legal Counsel Beth Milito in a statement. "Employers will be forced to limit hours fortheir workers and eliminate management positions."

But wage advocates say the move could actually give Main Street businesses a leg up. NELP's Conti said the move will cause employers to re-evaluate how they assign work hours, meaning they may instead spread out more hours between part-time workers. This could create new jobs rather than paying everyone who does more than 40 hours, presently,overtime.

"This will be great for Main Street businesses because more workers will have jobs, and full-time jobs, and they will have more money to spend in their communities on food, gas, clothing and other consumer goods," said Conti, adding an update to current overtime regulations is long overdue.

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