WASHINGTON—Raising the overtime pay exemption for executive or administrative employees to more than $50,000 annually will do great harm to small businesses, the Tire Industry Association (TIA) told the U.S. Department of Labor.
“Small businesses do not have the ability to adjust to dramatic increases in labor costs,” TIA Executive Vice President Roy Littlefield said in comments to the Labor Department on its July 6 proposed rule. “This rule will have a significant negative impact on their ability to maintain competitiveness in the market.”
The Fair Labor Standards Act (FLSA) requires a minimum wage and overtime pay of at least one and one-half times an employee's regular pay for any hours more than 40 in any given week, according to the Labor Department proposal.
However, there is a current “white collar” exemption for executive, administrative, professional, outside sales and computer employees earning more than $23,660 annually. This exemption was established in 2004, the agency said.
The proposal would more than double that overtime pay threshold to $50,440 beginning in 2016 and allow automatic annual updates.
“By way of this rulemaking, the department seeks to update the salary level to ensure that the FLSA's intended overtime protections are fully implemented, and to simplify the identification of nonexempt employees,” the document said.
In his comments submitted Sept. 2, Mr. Littlefield said the threshold it establishes is much more than most small businesses can afford.
“We have heard the following from our membership on what business decisions this proposed rule may cause them to make,” Mr. Littlefield said.
These decisions include:
c Raising prices on goods and services;
c Laying off some workers, and changing others from salaried to hourly;
c Reducing base pay to account for overtime pay;
c Changing full-time workers to part-time;
c Reclassifying job duties;
c Delaying or canceling plans to expand the business; and
c Providing less flexibility in hours worked.
“Raising the minimum salary will be devastating to employers,” Mr. Littlefield said. “It will hinder hiring practices, freeze wages and stifle economic growth during an already sluggish economic atmosphere.
“Having managers, assistant managers and supervisors is common practice in our industry,” he said. “These employees make a respectable income on salary and are given a wide range of benefits that come with that status. We fear this proposal would cause many employers to take away the salary and benefits and rather pay the employee hourly to make up for the rising costs.”