Business groups, municipalities raise concerns over new federal overtime rules

Business groups and local governments are slamming a new Obama administration rule that would make 4.2 million more full-time salaried workers eligible for overtime pay.

The U.S. Department of Labor today released the rule, which would increase wages by $12 billion over 10 years. The White House said in a fact sheet only 7 percent of full-time workers currently qualify for overtime based on their salaries, down from 62 percent in 1975. The rule would bring that back up to about 35 percent.

“This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” the Labor Department said today.

The rule, though, has raised concerns from employers across the board, including local governments, nonprofit groups, the UW System and Wisconsin Manufacturers and Commerce.

Chris Reader, WMC’s director of health and human resources policy, said in a press call today employers will have to make up the money going toward the increased overtime pay from somewhere. That, he said, might mean less generous benefit packages or making some employees go part-time.

“The issue is quite simple when you boil it down,” he said. “If you make something more expensive, you get less of it, and that’s what we think this rule will do.”

The rule doubles the threshold for when full-time salaried employees are no longer automatically eligible for overtime pay, marking the first increase since 2004. Currently, employees are automatically eligible for overtime unless they make more than $23,660 a year, but the rule would lift that to $47,476.

It also updates a similar rule for white-collar workers, lifting the salary level at which those employees become ineligible for overtime. The rule raises that level from $100,000 to $134,004 a year.

Both changes will take effect Dec. 1, with automatic updates to the salary thresholds happening every three years starting in 2020.

Reader and others on the call, which included the League of Wisconsin Municipalities and the Wisconsin Counties Association, said they’re open to some overtime adjustments. But the league’s executive director, Jerry Deschane, said doubling the threshold went too far, especially for local governments that have “zero flexibility for added cost” because of local levy limits.

“Doing it within one fiscal year is more than local governments can absorb, and it’s going to be a challenge,” he said.

House Speaker Paul Ryan said the rule “hurts the very people it alleges to help.”

“For the sake of his own political legacy, President Obama is rushing through regulations — like the overtime rule — that will cause people to lose their livelihoods,” the Janesville Republican said. “We are committed to fighting this rule and the many others that would be an absolute disaster for our economy.”

But the liberal group Citizen Action of Wisconsin called it a “boon” to local economies, saying workers will spend their extra money in the community.

“For years the economic deck has been stacked against working families, who have been working harder and harder with little more to show for it” said Robert Kraig, the group’s executive director. “The new federal overtime rule will mean that more will be rewarded for working longer hours, boosting consumer spending in our local economies as families can afford to go out to dinner, buy necessities, and send their kids to college.”

— By Polo Rocha,