Why Distributors Must Plan Before the November Elections
As the eyes of the nation are focused on what we could call an interesting campaign for the White House, it is worth noting that there is still a current administration in the White House, and if the history of recent departing presidents holds true, the last few months will be filled with regulatory action. While many issues are worth monitoring, including the finalization of the U.S. Department of Energy’s (DOE’s) furnace proposal and U.S. Environmental Protection Agency’s (EPA’s) action on the Significant New Alternatives Policy (SNAP) Program and Section 608 certification, it is the U.S. Department of Labor (DOL) that I believe will have the biggest impact on businesses.
Sometime this summer, DOL is expected to finalize a rule that will change the salary threshold for which overtime-exempt employees are paid. Currently, the minimum amount a salaried employee can earn is $23,600 per year, or $455 per week. DOL’s proposal seeks to raise that amount to $50,440 per year, or $970 per week. Additionally, the new rule would also permanently link the overtime threshold to the 40th percentile earnings for full-time salaried workers. This means the overtime threshold would increase every year going forward.
Employers probably will have fewer than 90 days to comply with the new standards. This will put businesses in a very difficult position of potentially reclassifying employees, restructuring job duties, reducing salaries in anticipation of new overtime expenses, or, in the worst-case scenario, imposing staff reductions.
Officially, HARDI commented on this position a few months ago. We agree with DOL that the current minimum compensation level is too low. However, we believe that more than doubling that threshold seems excessive, especially when considering the increase in the cost to provide health benefits to employees in recent years.
What would seem to be a good idea is that DOL would review the more than 100,000 comments that came in on this subject and head back to the drawing board. There’s an outside chance that DOL may reconsider, but given the amount of time left in the Obama administration, it is unlikely that they will restart the process as we requested.
Congress has heard the concerns of many groups and introduced the Protecting Workplace Advancement & Opportunity Act, which would prevent much of the proposal from taking effect and require DOL to study the impact of mandatory overtime expansion to small businesses, nonprofit organizations and public employers.
One of the bill’s authors, U.S. Sen. Tim Scott, R-South Carolina, said DOL’s proposal will lead to reduced hours and confusion for job creators and will limit growth opportunities for employees. “It is important that workplace policies address the needs of both employees and employers,” Scott said. “The Protecting Workplace Advancement and Opportunity Act stops the Department of Labor from irresponsibly redefining the overtime threshold without understanding the real-world consequences. It will also require them to start over and ensure that any new regulation on overtime considers the daily impact on our nation’s economy.”
While I understand the broad coverage of the 2016 elections and what a Clinton, Sanders, Cruz, Trump or yet unknown savior’s administration may look like, we cannot forget that we have an active government that is busy right now, and we must continue to engage in the governing process.
If we do not speak up, voice our concerns, and offer solutions, I fear we will continue to see the government taking an increasing role in determining how our businesses are structured (via the tax code). It will affect how companies interact with their employees (via the National Labor Relations Board) and the wages and benefits that employees receive (via this proposal and continuing development and implementation of the Affordable Care Act). While many of these proposals originate with good intentions, they often fail to have the positive impact that the regulators hope for and almost always end up costing the private sector more than anticipated.
Long story short, what happens in November will matter, but so does what happens today.