Obama’s New Rule Has Small Businesses Scrambling

Date: May 19, 2016 Last Edit: May 23, 2016

The recent overtime ruling is putting a squeeze on owners and employees alike.

In a move that could affect millions across the country, the Obama administration recently unveiled its new overtime rule—an initiative The Huffington Post called one of the “most ambitious economic reforms of the Obama era.” 

The plan will raise the exemption rate of overtime pay for executive, administrative, and professional employees from $23,660 to $47,476, making 4.2 million additional workers eligible, USA Today reported. Thirty-five percent of full-time, salaried employees will be able to receive overtime pay. 

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The overtime ruling has worried small business owners—and their employees. 

“Entry-level management positions are going to disappear and those employees will fall back into hourly jobs,” NFIB President and CEO Juanita Duggan told Politico. “Small businesses everywhere will be affected.” 

There is also concern that the new rules will disgruntle employees who might see a change in their employment status as a reflection of their work. 

“For many of these types of employees they’re going to be viewing it as a demotion,” David French, senior vice president of government relations for the National Retail Federation, told The Washington Post. “They’re going to have to clock in and clock out.” 

When the administration revealed the proposal in 2015, it received 270,000 public comments, many from concerned business owners opposed to the measure. Some of these business owners will address the regulation by reducing hours, relying more on part-time employees, or reclassifying employees from salary to hourly, according to The Wall Street Journal

The rule does offer some relief to business owners: Bonuses and incentive payments will count toward up to 10 percent of the new threshold, The Wall Street Journal reported. The rule is scheduled to take effect Dec. 1, and the threshold will rise with inflation every three years beginning on Jan. 1, 2020, according to the U.S. Department of Labor.

Visit NFIB’s Overtime Hub Page for More Information >>

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