Overtime Rules Could Spell Big Trouble for Retailers. What About You?

As you've probably heard by now, President Obama announced the Department of Labor’s final rule updating the overtime regulations for middle-class workers yesterday.

While the White House said the ruling is expected to boost wages for workers by $12 billion over the next 10 years, it's not going over well with many business associations, including the National Retail Federation (NRF) and The National Council of Chain Restaurants.

In response to the ruling, the NRF released the following statement from David French, its senior vice president for government relations:

“These rules are a career killer. With the stroke of a pen, the Labor Department is demoting millions of workers. In the retail sector alone, hundreds of thousands of career professionals will lose their status as salaried employees and find themselves reclassified as hourly workers, depriving them of the workplace flexibility and other benefits they so highly value.”

French also disparaged the one-size-fits-all approach of the bill. "[It] means businesses trying to make ends meet in small towns across America are now expected to pay the same salaries as those in New York City.”

Rob Green, executive director of The National Council of Chain Restaurants, echoed French's thoughts:

"If this outrageous regulation remains unchanged, chain restaurants will be forced to convert tens of thousands of managers from salaried professionals to hourly status in order to avoid costly and unpredictable impacts. Restaurant owners across the country are asking why the federal government wants to take a salary away from restaurant managers."

Research conducted for NRF shows that the rules will force employers to limit hours or cut base pay in order to make up for the added payroll costs of overtime expansion, leaving most workers with no increase in take-home pay despite added administrative costs. A separate survey found that the majority of retail managers and assistant managers — the very same people the new regulations are supposed to help — oppose the plan.

“These regulations are full of false promises,” French said. “Most of the people impacted by this change won't see any additional pay. Instead, this sudden and extraordinary increase will mean more red tape and fewer advancement opportunities for salaried professionals. In the real world — as opposed to D.C. conference rooms filled with career bureaucrats and political appointees — employers and employees will suffer the consequences of a policy rooted in pure politics.

The NRF pledges the fight to change this ruling is far from over. The group will continue to advocate alongside its congressional allies for realistic workplace policies.

“Overtime regulations need to be sensitive to cost-of-living differences throughout the country, moderate enough that they don’t block the career ambitions of young people and middle managers working to climb the career ladder, and gradual enough that business owners can implement them without penalizing the very people they were intended to help,” French added.

What do you think about the new overtime law? How will it affect your business? We’d love to hear from you, no matter the size company you work for. This is an important issue, and one we'll be following closely over the next few months.