Proposed Overtime Plan Will Hurt Workers, Small Businesses

Filed in Advocacy, Labor by on October 8, 2015 0 Comments
Brady, Hardy

Ed Brady (left) meets with Subcommittee Chairman Cresent Hardy (R-Nevada) after the hearing.

A U.S. Department of Labor (DOL) overtime proposal that would more than double the minimum salary threshold for white-collar exemptions will hurt workers, small businesses, the residential construction sector and housing affordability, NAHB told Congress today.

Testifying before the House Small Business Committee’s Subcommittee on Investigations, Oversight and Regulations, NAHB First Vice Chairman Ed Brady said the dramatic surge in the salary threshold that DOL proposes is unlikely to result in an increase in workers’ take-home pay.

“Rather, it will force business owners to restructure their workforce to compensate by scaling back on pay and benefits, as well as taking other steps such as cutting workers’ hours to avoid the overtime requirements,” said Brady. “NAHB strongly opposes the overtime proposal in its current form.”

The DOL plan would raise the salary level at which white-collar workers are exempt from minimum wage and overtime pay from the current $23,660 to $50,440 – an amount equal to the 40th percentile of earnings for all full-time salaried workers.

This “one-size-fits-all” approach to the overtime rules will result in a substantial financial impact on the home building industry.

Rule Could Affect 116,000 Construction Supervisors

NAHB analysis  shows that approximately 116,000 construction supervisors would be affected in some way by the proposal, and that it will have a disproportional impact across the nation due to regional variations in wages and cost of living.

For example, the proposed rule will affect at least 50% of construction supervisors in Arkansas, Mississippi, New Mexico and Tennessee.

“Wage amounts vary greatly from location to location, as well as among business sectors,” said Brady. “What one construction supervisor makes in Tennessee is different than what one earns in California – sometimes significantly.”

If employers are forced to convert salaried employees to hourly workers to remain solvent under the new salary threshold, these workers would become non-exempt, perhaps earn less money than they were making previously, and lose the workplace flexibility that comes with being a salaried employee.

Proposal Could Result in Higher Home Prices

A recent NAHB survey of its membership regarding the proposed overtime rules found that 56% of respondents indicated that they would take steps to minimize overtime, such as cut workers hours. Additionally, 55% reported they would reduce or eliminate bonuses. One-third indicated they would cut or end other benefits; 19% stated they would reduce or eliminate health insurance; 13% said they would lower salary to compensate; and 13% said they would switch from a salary to an hourly rate.

Moreover, 44% of builders noted that the change in the proposed overtime rules would result in higher home prices. A further 25% indicated that the proposed rule would make some projects unprofitable, and 19% reported that the change would cause their business to turn down some projects.

“None of these are acceptable outcomes,” said Brady. “It is imperative that the federal government refrain from implementing policies that will be damaging to the marketplace and housing affordability. DOL must closely examine the financial impact of this rule on home builders and other small businesses and revise this proposal accordingly.”

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