When President Barack Obama unveiled the final version of his new overtime rule in May, which in December is set to double the salary threshold at which salaried workers qualify and to provide millions more workers with access to overtime pay, there was a resounding cry of economic fear-mongering from the big business lobby and its reliable allies in the Republican Party.
But the strongest source of opposition is actually coming from the corporate wing of Obama’s own party. In July, Democratic Congressman Kurt Schrader of Oregon introduced legislation that would delay the full implementation of the higher salary threshold for three years. Schrader’s bill, dubbed the Overtime Reform and Enhancement Act, would also eliminate indexing the threshold, which the executive order stipulated would increase every three years in line with rising wages and inflation.
These changes would have a major impact on the enduring strength of Obama’s overtime rule, according to a report released last month by the Economic Policy Institute, the labor think tank that helped craft the rule’s language. “Rep. Schrader wants to reproduce the very disaster for working people the Department of Labor is seeking to prevent: an inevitable and significant loss of guaranteed overtime coverage due to inflation and wage growth,” the report declares.
During the past 30 years without a substantive increase to the salary threshold, the share of salaried workers with access to overtime plummeted from nearly 50 percent in 1975 to 9.5 percent in 2015. Today, just 5.1 million workers are eligible for overtime. Raising the threshold from the current level of $23,660 to $47,476 would guarantee as many as an additional 12.5 million workers access to overtime pay—a total of 17.5 million, or about 32 percent of the total workforce. Indexing the threshold would maintain that share of the salaried workforce granted overtime pay over the next 20 years, while covering about three million more workers as the workforce expands.
But if Schrader’s bill passes and the indexation provision is stripped, more than 10 million fewer salaried workers could be covered over the next 20 years. Inflation and wage growth would eat away at the number of eligible workers, which would drop from a share of 32.7 percent in 2016 to just 16 percent in 2035.
"The guts of DOL’s rule is the indexation of the salary test for exemption. If it isn’t indexed it immediately loses its value and protects fewer workers, quickly becoming meaningless, as the current $23,660 level is today," says Ross Eisenbrey, vice president of the Economic Policy Institute and the original proponent of the overtime rule.
The EPI report also finds that Schrader’s proposed three-year phase-in period would bring down the threshold in December to just under $36,000, giving roughly 6.3 million fewer workers overtime access than the current $47,476 level. Even by the end of the phase-in period, Schrader’s proposal would still cover 2.1 million fewer workers than Obama’s rule. "The slow phase-in is unnecessary and just denies higher wages or better hours for millions of workers for another three years," Eisenbrey says. "Employers should have been paying for their employees’ overtime all along. They’ve gotten an undeserved windfall and it should be ended [as soon as possible]."
Schrader is co-chair of the Blue Dog Coalition of “fiscally conservative” Democrats, and the legislation was cosponsored by four other members of the coalition: Jim Cooper of Tennessee, Gwen Graham of Florida, Collin Peterson of Minnesota, and Henry Cuellar of Texas. Though Schrader admits the current threshold is “horribly outdated,” he said that, “Without sufficient time to plan for the increase, cuts and demotions will become inevitable, and workers will actually end up making less than they made before.”
While House and Senate Republicans are trying to repeal the rule through the Congressional Review Act, business is coalescing around the Democrats’ effort as a stronger vessel to undermine the new rule. But this legislation is only part and parcel of a broader campaign to dismantle the slew of pro-worker regulations that Obama has passed in his second term.
Leading the current charge is the Partnership to Protect Workplace Opportunity, a large coalition of special interest associations, including some of the most powerful business groups like the U.S. Chamber of Commerce, the National Restaurant Association, the Society for Human Resource Management, and the National Franchise Association.
Just last Friday, the group sent a letter to Republican House leaders urging them to pass the bill before the threshold increases in December. “This massive, 100 percent increase in the salary threshold, which was created using questionable methodology and technical analysis, is the most far-reaching regulatory action taken by the DOL under the Obama Administration,” the letter stated. “The regulation will impact every single industry and the majority of employers in the U.S, without providing the purported benefits touted by the DOL.” The group contends that while the Fair Labor Standards Act grants the Labor Department the authority to set the threshold, it does not allow the administration to automatically increase the threshold level in future years without further input or comment.
The Economic Policy Institute rejects that argument, saying that “[i]f a future Department of Labor comes to believe the exemption threshold has risen too high and no longer reflects executive, professional, or administrative salaries, it can undertake a notice-and-comment rulemaking process to rewrite this regulation and reset the threshold.”
The Society for Human Resource Management, a co-chair organization of the partnership, has in recent years become an increasingly powerful anti-worker force on Capitol Hill. Since 2007, the association has spent millions of dollars lobbying Congress to do things like use the appropriations process to defund the National Labor Relations Board, in addition to trying to stop the Labor Department from successfully increasing the threshold.
Should the House and Senate pass Schrader’s bill, the White House has pledged to veto it. Still, even if the bill fails, it serves as a stark reminder that not all in the Democratic Party are comfortable with its current emphasis on putting workers’ interests before their bosses’.