New Obama Overtime Rules Draw Ire From Industry Groups

Shopping mall.
A shopping mall.
Getty Images.

President Barack Obama and the United States Department of Labor finalized a new overtime rule today that aims to raise the wages for millions of U.S. workers. But the new law is already under fire by retail and footwear industry groups.

Starting Dec. 1, the Department of Labor’s overtime threshold for salaried workers will be raised from the 2004 wage of $23,660 to $47,476, meaning an estimated 4.2 million more workers will be eligible for overtime pay. The new rules target white-collar salaried employees, who often work more than 40 hours a week and go uncompensated for their hours. The new rate is for the first time also tied to inflation and will be adjusted every three years.

The Department of Labor changes also gives President Obama the opportunity to raise wages, without having to move a minimum-wage bill through Congress.

The change doesn’t mean everyone is qualified to earn overtime under the new rules, however, and the Department of Labor has outlined what it defines as administrative versus executive roles. Generally, experts say the rules will impact middle managers in retail, food service and entry-level office positions.

Industry group are already reacting negatively to the news, arguing the costs are going to force retailers and companies to reclassify workers and change administrative expenses to accommodate the increase. The American Apparel and Footwear Association (AAFA) said it was worried the change would adversely affect some member brands that have key contracts with the U.S. government, especially for the military, that can’t be adjusted for the increase.

“We remain concerned about the adverse impact that this mandate will have on our members, particularly our government contractors who are working on contracts that do not anticipate such labor cost increases,” said Steve Lamar, the EVP of the AAFA.

President of the Footwear Retailers and Distributors of America Matt Priest said he was concerned that the approach was simply too broad to account for all the kinds of jobs it would cover. “We are a very diverse country, and one size fits all regulatory framework for overtime rules isn’t something that is advantageous to job creation and growing those businesses,” he said. “We’re concerned about it and we hope the administration rethinks it and there is some Congressional input that comes into it.”

The National Retail Federation (NRF) has labeled the bill a “career killer” and lambasted the Obama administration and Department of Labor for the changes. The NRF argues that the changes are too broad and don’t take into account variations in cost of living throughout the U.S. According to a study by the NRF, this means employers will be more likely to cut base pay or limit hours to make up for the overtime increases. The organization has already said it is headed to Congress to get legislation passed to block the changes.

David French, the SVP of government relations, said in a release today: “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. And the one-size-fits-all approach 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.”

Similarly, the National Sporting Goods Association said that the changes are going to reduce jobs in the industry and force reclassification of workers. “This new rule will have a serious negative impact on employers,” said the organization’s president & CEO, Matt Carlson. “We want our members to be prepared for this new rule and have plans in place to adapt to these changes by the Dec. 1 implementation date.”