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Hearing Recap: Overtime Edition

Today, the Workforce Protections Subcommittee held a hearing entitled “Bad for Business: DOL’s Proposed Overtime Rule.” 
Like many Biden administration regulations, the proposed overtime rule revives—and broadens—an Obama-era precedent. Whereas Obama’s poorly conceived and ultimately unlawful rule would have increased the overtime threshold to $47,676, President Biden’s rule increases it to a whopping $55,068—a 55 percent jump from the current level.

In his opening statement, Subcommittee Chairman Kevin Kiley (R-CA) made the case against such a drastic change. He stated, “As businesses and nonprofits work to recover from the pandemic and record high inflation, the Biden administration wants to implement a new rule that will jeopardize their survival and put workers at risk.”

That’s Bidenomics for you. Just as soon as small businesses find room to breathe in this economy, the administration slams them with more unworkable regulatory costs.

Today’s witness panel included experts Paul DeCamp, former Administrator of the U.S. Department of Labor’s Wage and Hour Division; Jagruti Panwala, hotel owner and operator; and Dr. Douglas Holtz-Eakin, President of American Action Forum.

Rep. Eric Burlison (R-MO) led the witness questioning by exposing the Biden administration’s attempt to fast-track the proposed rule with a short, 60-day comment period. He asked Mr. DeCamp, “In your experience, have you ever seen such a short comment period for a policy of this magnitude?”

“Not of this magnitude. We’ve seen other lesser impactful rules that have 60-day comment periods,” replied Mr. Decamp, adding that the Department “tends to honor requests for extensions of the comment period.”

Rep. Tim Walberg (R-MI) also questioned the abnormality of the proposed rule. After noting that the rule is historically excessive, he asked Mr. Decamp, “Could you discuss the history of these adjustments in more detail?”

“The average annual rate of increase over the past 80-something years varied between about 2.6 percent per year and a high of 6.97 percent per year. This proposal would increase 11.55 percent, or more, per year,” replied Mr. DeCamp.

The unfounded speediness and scope of the proposed rule raises a key question: Why? What are the benefits?

As Rep. Mary Miller (R-IL) found, shockingly little. She honed in on the potential economic consequences of the proposed rule during her exchange with Ms. Panwala. “If this rule goes into effect, would the hotel industry be forced to fire or lay off some of their employees?” she asked.

“Unfortunately, that would be the scenario. The hotels run on a very very very tight margin,” Ms. Panwala responded.

In his questioning, Rep. Kiley raised more concerns about the proposed rule’s effect. Regarding the potential benefits to workers, Rep. Kiley asked, “Only 2.4 percent [of potential beneficiaries] are living in poverty, is that correct?”

“That’s correct,” responded Dr. Holtz-Eakin. He further called it “an attempt to redistribute wages toward lower wage individuals. Viewed from that perspective, it’s a really poorly targeted policy… it does not help those who are living in poverty.” 
Finally, many workers find value in their exempt status that would be upended by the proposed rule. Chairwoman Virginia Foxx (R-NC) asked, “What will be the effect of raising the overtime salary threshold on currently exempt employees who will need to be reclassified?”

Mr. DeCamp offered two points in response. First, reclassified employees would lose the security of a salary not subject to changes in workflow patterns, and second, they would lose the greater benefits and flexibility typically reserved for exempt employees.

Overall, the overtime rule is a bad deal for American small business owners and workers. It’s simply too fast, too far, and too flawed.

Bottom Line: Committee Republicans are once again pushing back against the Biden administration’s heavy-handed, harmful regulatory agenda. 
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