Removing Barriers Blog

House Committee Holds Hearing on Overtime Rule
Posted June 10, 2016 by Chandler Schuette

This week, we sent a letter in support of the House Education and Workforce Committee hearing entitled “The Administration’s Overtime Rule and Its Consequences for Workers, Students, Nonprofits, and Small Businesses.” The hearing focused on the unintended consequences faced by businesses and nonprofits resulting from the expanded coverage of overtime from the Department of Labor’s (DOL) recent rule.  The witnesses discussed how the DOL’s rule will create higher tuition costs, limit career advancement, and promote larger hurdles for startups.   

Throughout the rulemaking process, we have continually expressed concerns with the DOL changes to the Fair Labor Standards Act, (FLSA).  The rule will increase the threshold for overtime pay eligibility by approximately double the previous rate, from $23,600 annually to $47,476 annually. This final rule will not only create regulatory burdens for credit unions when a disproportional percentage of employees are swept into the new threshold, but it will also create unintended negative consequences for those it aims to help, as well as credit union members. Credit unions in rural and underserved areas, as well as small credit unions, may face even greater compliance and regulatory burdens as a result of the rule.   

If a credit union cannot afford to increase salaries, which is plausible during this time of unprecedented regulatory burden, some employees even at the management level could have to change their employment status from exempt to non-exempt. Employees, particularly at the management level, could see this change in status as a demotion, which could lower employee morale.  

Employees may also value flexibility and other “perks” above a small increase in compensation. Employees may have to make specific arrangements for leave, or potentially take unpaid leave, as opposed to a more flexible current situation for time off as described by some credit unions. Employers may also be forced to create stringent rules for overtime pay and have regimented systems of clocking in and out.   

Changes to the number of employee work hours, or the size of credit union staff would ultimately affect credit union members as well. It is not always easy for credit union members to visit a branch during regular business hours when they are at their own jobs. Limiting credit union staff or hours may make it more difficult to keep branches open during convenient times for working families. If credit unions have to close on weekends or have shorter hours, this could affect the ability of members to receive service.   

 Ultimately, DOL did not properly weigh the burdens of this rule against the services credit unions provide to their communities. Our analysis of the DOL’s overtime rule concludes that the unintended consequences and additional regulatory burdens placed on credit unions outweigh the good intentions of the rule.