WASHINGTON – As the December 1, 2016 compliance deadline for the Department of Labor’s new overtime rule rapidly approaches, traditional small businesses, technology start-ups, and other small employers told the House Small Business Committee today that they may soon be forced to layoff workers, reduce benefits and lower wages to cover the costs of the new federally-mandated requirements.
“The DOL has heralded this rule as a long-overdue action that will provide tremendous benefits to workers,” said House Small Business Committee Chairman Steve Chabot (R-OH). “However, like so many of this Administration’s policies, this one-size-fits-all mandate will do far more harm than good.”
“Numerous small employers weighed in on this proposal and told the Department of Labor that the unprecedented salary level increase would have very negative repercussions,” Chairman Chabot noted. “They asked for a common sense rule that recognized that not all employers have the same resources or utilize the same compensation structures. Unfortunately, their pleas fell on deaf ears.”
“I want to assure the small employers here today, and those tuning in from across this great country, that while DOL didn’t listen to you, we are,” Chairman Chabot added.
Painful Choices Looming for Small Businesses
“From a personal perspective, this rule is likely to have negative consequences - not only to my company, but to my employees as well,” testified Albert F. Macre, a general partner at Payroll+ Services in Steubenville, OH.
“In addition to these negative impacts, the implementation window is very short. This rule will become effective on December 1, 2016, just over five months from now. Given that many small businesses are still struggling with the implementation of the Affordable Care Act five years after the enactment, this window of compliance seems barely cracked open,” Macre explained.
“As a small business owner with several salaried employees positioned between the current exempt overtime earnings threshold and that created by the Department of Labor’s new rule, I now find myself standing with countless other small business owners forced to swallow more government 'medication' prescribed before an accurate attempt at diagnosis has been completed,”Macre added.
Stunting the Growth of Tech Start-ups
“Looking back on when I started my company in 2010, I can tell you with 100% certainty that I would have not been able to hire my first employee had this rule been in place,” said Adam Robinson, the Co-founder of Hireology, a human resources technology business, in Chicago, IL.
“My company now has 100 employees with a median annual compensation that exceeds $70,000 a year - well above the US average. How many “Hireology’s” won’t get started as a result of this rule making that 1st employee unaffordable for an entrepreneur? Are fewer good-paying jobs created and fewer businesses launched the outcomes that are desired here?” asked Robinson.
“Like most federal regulations, the overtime rule is a one-size-fits-all policy that doesn’t distinguish among firm size, sector, location, or compensation structure. This means that companies that don’t fit the Department of Labor’s outdated model will be disproportionately hurt by the rule,” explained Robinson.
“At a time when the middle-class in this country is already being squeezed, the tech sector, sales jobs, and middle-management positions are a few areas that still provide relief. The overtime rule threatens to close those career pathways that have been paved by hard work,” he added.
Small Local Governments and Non-Profits Also Affected
“Mineral County is the very definition of a small governmental entity and we are very concerned about the potential impact of the new overtime rule on our ability to fulfill our fundamental responsibilities — many of which are mandated by the state and federal government,” testified Jerrie Tipton, the Chairman of the Mineral County Board of Commissioners in Nevada.
“Unfortunately, the new overtime rule does not adequately address the wide variations in local labor markets in counties across the country. And ultimately, please remember that the new rule will have broad consequences for taxpayers — and county services,” observed Commissioner Tipton.
“[T]he rule will drastically impact the budget and operations of nonprofits, as well as colleges and universities, health care providers, small businesses and local governments. These employers may be unable to absorb such costs without adverse impact to employee relations or fiscal operations,” testified Christine V. Walters, the Sole-Proprietor of FiveL Company in Westminster, MD.
“One of my clients provides rehabilitation services to a disadvantaged population, of which 85 percent of their clients meet the current poverty threshold. Unlike other employers, this organization cannot transfer increased costs to their lower-income consumers,” explained Walters.
You can read full testimony from today’s hearing here and watch full video of the hearing here.
- Chairman Chabot served as co-chairman of the special House Task Force on Reducing Regulatory Burdens. Last week, Speaker Ryan, Chairman Chabot and House Republicans unveiled the work of the task force in front of the Department of Labor’s Washington DC headquarters and spoke at length about the overtime rule.
- You can read the task force’s full report titled “A Better Way to Grow the Economy”hereand view video of Chabot’s remarkshere.
- Chairman Chabot is a co-sponsor of H.R. 4773, the Protecting Workplace Advancement and Opportunity Act, which would nullify the rule and require the DOL do a thorough economic impact analysis of any substantially similar rule.
- The Small Business Committee has vigorously opposed the DOL overtime rule for months. The Committee has held numerous hearings and roundtables and sent multiple letters explaining to the administration the damage that will be done to America’s 28 million small businesses and other small employers as a result of the rule.