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House Committee Holds Hearing on Final Overtime Rule

On June 9, the House Committee on Education and the Workforce held a hearing to examine the consequences of the Department of Labor’s (DOL) Overtime Rule on workers, students, nonprofits and small businesses. The hearing provided an opportunity and a platform for universities and nonprofits to voice concerns about the negative consequences of DOL’s rule, which doubles the salary threshold under which employees qualify for overtime pay. In the words of Committee Chairman John Kline (R-MN), “The department ignored the voices of those who must implement this rule in their workplaces, on their campuses, and as they serve the needs of people in their communities.”

Tina Sharby, chief human resources officer at Easter Seals New Hampshire, described the costly consequences of DOL’s regulation to her nonprofit organization, as they will need to raise the salaries of certain exempt staff and reclassify 280 employees to non-exempt status at a cost of $427,000 in the first year alone. The rule will also place significant risk on certain programs within the organization that provide 24/7 services to children and military veterans, because the potential cost for overtime will limit the organization’s ability to “provide around-the-clock care, lessening these lifesaving support services.”

Similar negative consequences were highlighted by Michael Rounds, associate vice president for human resources management at the University of Kansas, who provided a snapshot of the impact this regulation will have on the higher education community. The University of Kansas has 354 currently exempt employees with salaries below the $47,476 threshold; it will cost the university nearly $3 million to raise these employees to the new threshold in order to maintain their exempt status. The magnitude of these costs cannot be easily absorbed. As a result, the university fears that it “will not be able to afford as many post docs and will need to cut back on the number of research openings and opportunities that are available,” while also making it highly likely “that tuition will ultimately be pushed higher in future years in order to address the enduring impacts of the new overtime rule.”

The Democrats’ witness, Jared Bernstein, former economic adviser to Vice President Joe Biden, countered many of the previous claims by arguing that the rhetoric from stakeholders opposing the rule is misleading, as changes associated with the new standard are estimated to “cost 0.03 percent of the national wage bill.” He said the compliance burden is minimal because the “need for the duties test on millions of salaried workers is now obviated” thanks to the higher threshold, and workplace flexibility will not be impeded because there is “little difference in … workplace flexibility between hourly and salaried workers with earnings below $50,000.”

Much of what Bernstein said was subsequently put to rest by Alexander Passantino, a partner at Seyfarth Shaw LLP and a former acting Wage and Hour administrator during the George W. Bush administration, who said that “regulatory familiarization, adjustment and managerial costs will be significant for all employers” and “employees will work the same, they will earn the same, but they will lose the flexibility and be required to track their work in a way that they have not done previously.”

Passantino also partnered with CUPA-HR immediately following to the rule’s release to present a May 25 webinar on the key elements of the new regulations and describe the implementation steps that colleges and universities must take. With more than 7,000 in attendance, it is clear that the new rule will significantly impact higher education.

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