Editorial: Overriding overtime rule bad for business
Gov. Gretchen Whitmer last month ordered the state Department of Labor and Economic Opportunity to write a rule that would expand overtime eligibility over and above a pending federal increase. She should hit pause.
While the governor defends her action as good for working Michiganians, it could have a negative impact on Michigan businesses. And it would hurt the very workers it's intended to help.
Michigan’s current overtime eligibility limit for salaried workers is around $23,600 per year. Come January, that threshold will rise with the federal increase to $35,568 per year.
Whitmer’s rule would potentially raise the benchmark by an additional 43%, impacting an estimated 200,000 workers.
Her administration plans to hike the limit for earning overtime to $51,000 — which, adjusting for inflation, is about what former President Barack Obama was shooting for in 2016 when he tried to boost the federal threshold to $47,476. He was stopped by the courts.
“We’ve been down this road before,” says F. Vincent Vernuccio, senior fellow at the Mackinac Center for Public Policy. “President Obama tried to raise the threshold a couple of years ago. The move was wrong then and the move is wrong now.
“The more sensible approach is the incremental approach promulgated by the U.S. Department of Labor, which raised the threshold to $35,568.”
Vernuccio says if Michigan's rule is ever implemented it would hurt workers.
Wendy Block, vice president of business advocacy for the Michigan Chamber of Commerce, points to the damaging impact on employers.
“It’s going to increase payroll costs dramatically,” Block says. “The talking points are great, but increasing the threshold in this way is too high, too fast. Money doesn’t grow on trees, and employers will have to look at how to absorb costs.”
Block says employers will have to choose between raising prices or slashing payroll. That could mean reducing workers' hours, transitioning workers from salaried positions to hourly or scaling back benefits. It could also hamper flexibility salaried workers currently enjoy.
“In our mind, a governor cannot unilaterally impose a government mandate and not expect it to have a negative impact on the economy and on the very workers it’s intended to help,” Block says. "It’s completely reckless.”
Most states abide by the federal threshold for overtime eligibility, except for a handful of liberal states, including California, New York and Washington.
“Those states have much higher costs of living and higher costs for businesses," Block says.
Michigan should avoid following their lead.
Not only is Whitmer threatening to harm the labor market, but she’s also bypassing the legislative branch.
Luckily, the rule-making process is slow and will likely extend well into 2020. There’s still time for the administration to realize the rule would be bad news for business in Michigan.