Foes of Overtime Rule Present Timeless Ally: Small Business

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Ben Penn and Chris Opfer

March 21 — As lobbyists and Republican lawmakers look to block the Labor Department’s upcoming final overtime regulation, they’re turning to a timeless partner for the opposition's public face: small business.

Reps. Phil Roe (R-Tenn.) and Tim Walberg (R-Mich.), who chair two Education and the Workforce subcommittees, confirmed to Bloomberg BNA in recent weeks that Republicans intend to rail against the proposed rule by stressing its impact on smaller employers.

Expanding overtime eligibility for workers will force many of these businesses to trim jobs and eliminate lower-level management positions, the lawmakers said.

The small business angle is a well-worn page from the Republican playbook, one to which GOP lawmakers and the employer community have turned in recent years to combat minimum wage increases and expanded joint employer liability.

It’s a particularly attractive tool for challenging the overtime rule, a final version of which is expected to have strong public support and is likely to come right in the middle of the election season.

The final rule would expand overtime wage eligibility to some 5 million additional workers. The department sent the draft final regulation to the White House's Office of Management and Budget for review March 14 , and three days later Republicans members from both chambers introduced legislation intended to stop the rule .

Should the issue morph into a political debate in the run-up to the November elections, there's a benefit to putting small businesses in the spotlight, the top labor lobbyist of one powerful trade group said.

“They have stories that some people relate better to because it shows that this is not just impacting one big monolith company, but the mom-and-pops as well,” Angelo Amador, vice president of labor and workforce policy at the National Restaurant Association, told Bloomberg BNA.

Blocking Rule Tough Sell

Lobbyists told Bloomberg BNA that they've been educating lawmakers about the proposed regulation's alleged detrimental effect on a wide range of employers. That includes a strong emphasis on small companies.

Several sources who oppose the rule said they're prominently featuring small businesses in their attack because those employers are the most vulnerable to rising payroll costs. At the same time, some members of Congress said the small business argument may be easier to make to the general public.

“There's no question that” undoing the regulation could be a tough sell for constituents, Roe told Bloomberg BNA in a recent interview. Focusing on small business may be the best way to fight the DOL rule, he said. Roe is the top Republican on the Education and the Workforce Committee's Subcommittee on Health, Employment, Labor and Pensions.

Worker advocates and other progressive groups aren't convinced that the Republican party wants to wage a full-scale overtime war in the middle of an election season. However, they said they would relish the opportunity to debate the issue in front of wage-conscious voters.

“I think it’s such a loser for the Republicans to try to block it,” Ross Eisenbrey, vice president of the Economic Policy Institute, told Bloomberg BNA March 7. “They would be saying to millions of Americans: We don’t want you to get an overtime pay increase.”

The DOL consulted with Eisenbrey on the proposal during the pre-rulemaking phase.

Service Sector Leading Charge

The regulation was first proposed in 2015 by the DOL's Wage and Hour Division . It would more than double the salary threshold below which workers are eligible for time-and-a-half pay for all hours in excess of 40 each week. The threshold would go from the current $23,660 per year to $50,440.

Service sector groups, like those representing retail and restaurant businesses, have been among the most vocal critics of the rule. Many mid-level managers in those industries work more than 40 hours per week but are currently exempted from overtime pay because they make more than $23,660 and perform supervisory duties.

Service employers of all sizes have griped about the impact of compliance. The National Retail Federation, for instance, speaks for both large and small retailers when relaying displeasure with the proposal, a spokeswoman said in an e-mail.

“Our smallest retailers have been some of the most passionate voices against this rule,” the NRF spokeswoman said.

More Challenges Coming?

Republicans lining up against the proposed rule have a couple of legislative options. In addition to the stand-alone legislation aimed at blocking the rule, they could put forward an appropriations rider to block it and a Congressional Review Act challenge to delay the regulation until there’s a new president in the White House.

Those moves will be tough to pull off without more than the couple of Democrats who have criticized the proposed rule so far. Opponents will look to put a human face on the issue by stressing what they say are the dire consequences of such a massive expansion of overtime pay.

“I believe this is where the people are probably going to get hurt the most—small business,” Rep. Cresent Hardy (R-Nev.) told Bloomberg BNA. The threat is particularly acute for employers in rural areas where the cost of living is relatively low, said Hardy, who chairs the Small Business Committee's Subcommittee on Investigations, Oversight and Regulations.

The strategy is meant to counteract the rule’s main selling point: that it will bolster workers’ paychecks in a time when wages have largely stayed flat. Opponents want to allay likely public skepticism about the alleged ills of a rule that could make millions more people eligible for time-and-a-half pay.

The situation is similar to the minimum wage debate, where opponents of raising the pay floor often cite ballooning payroll costs for smaller employers. The small business angle was also the centerpiece of the recent fight against the National Labor Relations Board’s decision to broaden joint employer liability for unfair labor practices, an effort spearheaded by a cadre of employer groups dubbed the Coalition to Save Local Businesses.

“I think that’s been the go-to Republican strategy for fighting wage-raising regulations and laws for decades,” Seth Harris, a former Obama administration deputy labor secretary, told Bloomberg BNA March 11. “So the fact that Republicans would turn to it again is not only unsurprising, it would be surprising if they didn’t.”

Coalition Ramps Up Lawmaker Outreach

Many of the same organizations comprising the Coalition to Save Local Businesses are also aligned in a network of anti-overtime rule employer groups calling themselves the Partnership to Protect Workplace Opportunity.

The overtime-focused advocates have been meeting with lawmakers and their staffs in recent weeks to express concerns about the rule's impact on a “trifecta” of employer types, Lisa Horn, the coalition's senior lobbyist, told Bloomberg BNA. She was referring to small businesses, nonprofit organizations and public sector entities.

The PPWO is open to all legislative attacks on the rule, said Horn, the director of congressional affairs at the Society for Human Resource Management. For the time being, the PPWO is hoping to urge lawmakers to contact the DOL and White House in a last-ditch effort to ask them to reconsider the regulation as proposed, Horn said.

SHRM is joined in the partnership by such trade associations as the U.S. Chamber of Commerce, the National Retail Federation and the National Restaurant Association.

Stories about employers likely to feel the greatest impact have been crucial in galvanizing allies from both parties on Capitol Hill, Horn said.

The proposal's failure to account for regional cost-of-living differences is another point of emphasis.

Businesses in the South and rural regions “are going to feel the impact because the cost of living is different than in Washington, D.C.,” Amanda Wood, director of employment policy at the National Association of Manufacturers, told Bloomberg BNA. “And yes, a lot of those [rural] areas are probably made up of small businesses,” she added.

Large Corporations Still Interested

Despite the public attention on small companies, larger employers have also been monitoring the regulation behind the scenes and using their status on Capitol Hill to influence lawmakers about the rule's impact.

The CEO of the largest employer in the U.S., Wal-Mart Stores Inc., had a private phone conversation about the rule with Labor Secretary Thomas Perez and WHD Administrator David Weil in September, according to an ex parte communication notice posted on

A Bloomberg BNA analysis of federal lobbying disclosures shows that a number of larger employers are weighing in on the regulation.

Among the major national chains, Yum! Brands, Inc.—owner of Taco Bell, Pizza Hut and KFC—reached out to House and Senate lawmakers on the overtime rule in the second, third and fourth quarters. Yum relied on both in-house lobbyists and an outside firm.

Dunkin' Brands Inc. also conducted outreach on the overtime rule in the first and second quarters of 2015. Darden Restaurants, operator of some 1,500 stores—including Olive Garden—retained a lobbying firm to educate the House and Senate on the overtime proposal as well.

Some of the nation's major employers even align themselves with small business when speaking about the regulation. Mike Shutley, Dunkin's vice president of government affairs, told Bloomberg BNA in a March 14 e-mail that the corporation works with its Dunkin' Donuts and Baskin-Robbins franchisees to help them prepare for the overtime regulation.

Dunkin's continuing outreach to lawmakers on various franchising issues has included discussions of the overtime rule's effect on franchisees, a spokeswoman said.

But when the rule is released, don't expect Dunkin' and other corporations to step into the limelight.

“Everybody knows that the Walmarts, the McDonald's, the Targets, the big employers will grumble about this, but they’ll adjust to it very easily,” Judy Conti, federal advocacy coordinator of the National Employment Law Project, told Bloomberg BNA March 9.

She said she's fully expecting the overtime foes to “trot out the small businesses and the nonprofits. Those are very prototypically more politically appealing characters, if you will, than big box retail stores.”

To contact the reporters on this story: Ben Penn in Washington at and Chris Opfer in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at

Request Labor & Employment on Bloomberg Law