NFIB's Duggan: Government Working Overtime to Complicate Small Business

Date: May 03, 2016

Dear NFIB Members,

The White House is expected next week to approve a new regulation that could affect millions of small businesses, driving up their labor costs and creating more layers of red tape.

The Department of Labor’s proposed overtime rule raises the salary threshold for eligible workers from $23,660 to $50,440. That means salaried employees earning less than $50,440 will now be eligible for time-and-a-half for every hour they work beyond 40 hours per week.

The White House brags that 5 million more workers will be eligible for overtime under the new rule. That assumes that every business can and will pay. The economy doesn’t work that way.

Businesses that cannot absorb higher costs will respond in two ways. One option is to convert some salaried employees into hourly workers. In other words, those workers will be demoted. Many will lose the benefits that come with salaried positions. The other alternative for business owners will be to strictly limit hours for salaried employees. Naturally, that will create more paperwork and reporting requirements, which means more time and money that small businesses don’t have in surplus.

It will also mean lower productivity. Salaried employees who are forbidden from exceeding 40 hours per week will have to drop what they’re doing regardless of whether the work is finished. That’s bound to have consequences for businesses and customers that the federal bureaucrats haven’t imagined. Projects will take longer. Orders won’t be filled. Fewer customers served. The bottom line is that the cost of government mandates very frequently exceeds the benefits promised by the government.

According to NFIB research, 44 percent of all small businesses have at least one employee who will be affected by the new mandate. Your business is very likely among them. Our policy staff will analyze the final regulation as soon as it emerges. In the meantime, please don’t hesitate to contact us with any questions.

Juanita Duggan, NFIB President & CEO

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