Removing Barriers Blog

House Hearing Focuses on Unintended Consequences of DOL Overtime Rule
Posted June 23, 2016 by CUNA Advocacy

For nearly a year, we have been continually expressing credit union-specific concerns with the Department of Labor’s (DOL) changes to the Fair Labor Standards Act (FLSA), which increased the threshold for overtime pay eligibility by approximately double the previous rate, from $23,600 annually to $47,476 annually.  

To further these efforts, today we sent a letter in support of the House Small Business Committee's hearing entitled “Damaging Repercussions: DOL’s Overtime Rule, Small Employers, and their Employees.” This hearing featured testimony from small business owners and HR experts from across the country, who highlighted the difficulties of complying with the complex overtime rule, and difficulties in finding the cash to pay for extended overtime benefits. 

During the hearing, several of the panelists echoed concerns that we have held since the rule was proposed; namely that applying one income threshold for the entire country, regardless of local costs of living and average salaries, does not make sense for a country as large and diverse as the US. This rule especially does not make sense for small businesses in rural and underserved areas who often have very differently budgets than large businesses in metropolitan areas. 

Our letter thanked the committee for holding this hearing, and described how the DOL’s rule magnifies the challenges credit unions are already facing due to an unprecedented amount of regulatory burden over the past several years. It also discussed some of the less readily apparent unintended consequences that could result from the DOL overtime rule- for example, employers who have unexpected expenses as a result of realigning resources may become unable to hire new employees, be forced to convert fulltime positions to part-time, or be forced to change exempt positions to non exempt. Employees could also lose flexibility and other “perks,” despite small increases in compensation as mandated by the rule. 

Ultimately, we believe that the unintended negative consequences associated with the DOL's rule, which cause credit unions to have fewer resources, may diminish any benefit the rule provides to employees now falling under the new threshold.