Small business owners warn extending overtime pay will kill jobs

President Barack Obama has proposed an overhaul of the nation’s overtime pay rules that could require business owners to pay billions more for overtime.

“We've got to keep making sure hard work is rewarded,” Obama wrote in an op-ed published Monday on The Huffington Post website. “That’s how America should do business. In this country, a hard day's work deserves a fair day's pay.”

Current rules require overtime pay for workers putting in more than 40 hours per week but earning less than $23,660 dollars a year. The president’s plan would raise that threshold and require overtime pay for those making up to $50,440 a year.

The plan released Monday evening faces strong resistance from Republicans and the business community, who say it does little to help create new jobs.

“Making more employees eligible for overtime by severely restricting the exemptions will not guarantee more income,” said Randy Johnson, senior vice president with the U.S. Chamber of Commerce. Johnson predicted “many reclassified employees will lose benefits, flexibility, status, and opportunities for advancement.”

The Chamber’s small business owners say they will have to fire full-time employees and hire more part-time or independent contractors to avoid the pay increases. Johnson said the regulations will add “more burdens” and the Obama administration expects businesses to “just absorb the impact.”

James Olney, senior human resources consultant and attorney at Associated Financial Group, echoed those concerns.

“Small businesses have relatively small margins for their budget. … There’s going to be less money for small businesses to spend on other things that are necessary for them to function,” he said.

In an effort to provide an alternative to the overtime pay proposal, Republicans in the Senate proposed legislation in March to offer families extra leave time. The bill, the Family Friendly and Workplace Flexibility Act, would let employers give their workers an option to put their earned overtime hours toward paid family leave, rather than getting paid time-and-a-half.

Sen. Lamar Alexander, R-Tenn., the senior Republican on the Senate labor committee, said the president’s directive “seems engineered to make it as unappealing as possible to be an employer creating jobs in this country.”

But the bill allowing employees to elect more vacation pay did not pass through Congress.

With a Republican-controlled House and Senate, the president decided to use an executive order to move his agenda forward. Critics say the policy is part of a broader political strategy by the Obama administration to appeal to middle-class voters and make Republicans look bad.

“The government is engaging in this for show. … It helps paint Republicans as heartless, but the economic reality is that it will have a negative effect,” said Jeffrey Miron, an economist from the Cato Institute and Harvard University.