Obama Administration Overtime Rule Will Hurt Workers

Octavio Mantilla is the quintessential immigrant success story. With few opportunities in his native Nicaragua, his parents made the tough decision of sending him to live with relatives in the United States when he was 14 years old. With limited English but a deep desire to make the best of the opportunities in his adopted home, Octavio began washing dishes and waiting on tables while completing an undergraduate degree at Tulane University and later an MBA from the University of New Orleans.

The rest, as they say, is history. Today, Octavio is a successful restaurateur and a co-owner of the Besh Restaurant Group. But as the Obama administration proposes a new overtime rule that will affect close to 5 million salaried workers, including many that work in the restaurant industry, Mantilla is worried that today’s immigrants will have a harder time rising through the ranks the way he did.

Mantilla was among a handful of witnesses recently called to testify before the U.S. Senate Committee on Small Businesses and Entrepreneurship that is examining the Obama administration’s proposed rule change, which would raise the threshold extending overtime pay to eligible employees. Under current law, most employees making up to $23,600 a year are able to collect over time pay when working more than 40 hours a week. Under the proposed new rule, that threshold would rise to $50,440 a year.

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Mantilla attending the “An Examination of the Administration’s Overtime Rule and the Rising Costs of Doing Business” hearing.

According to the administration, the change is necessary to protect overtime pay for hard working Americans, but also to grow their paychecks. Unfortunately, according to leading economists, the proposed rule change will have no immediate impact on pay. Heritage Foundation economist James Sherk explains:

“Economists have found that employees and employers care mostly about their overall employment package: total hours worked and total pay offered for those hours. They don’t care much about the pay rate for individual hours, provided the overall package doesn’t change. So when the government requires employers to pay extra for overtime hours, they do—and reduce base wages by about the same amount. Workers’ weekly take-home pay changes little.”

Besides doing little to bolster worker’s wages, there is also something more concerning at stake: less flexibility in work hours. Some small to medium-sized businesses may choose to revert previously salaried employees to hourly wages, so that they do not have to pay overtime under the new guidelines.

Without the flexibility of being a salaried employee, Octavio Mantilla wonders if he would have been able to rise through the ranks in the service industry while simultaneously pursuing his studies. Mantilla tells Opportunity Lives that he is absolutely convinced if the rule change goes into effect, immigrants working in the service industry will have a much more difficult time improving their skills and educational abilities without the flexibility of being a salaried employee.

Listen to the entire interview with Octavio Mantilla here.

That concern is echoed by Christin Fernandez, a spokesperson for the National Restaurant Association. “Restaurants pride themselves on offering tremendous opportunity for employees to advance through the ranks quickly but the doubling of the currently salary threshold for exempt employees coupled with a long duties could stifle that opportunity,” she told Opportunity Lives.

And with so many Latinos and immigrants working in the service industry, the influential LIBRE Initiative, a grassroots advocacy organization promoting the free enterprise system, issued a statement opposing the proposed rule, in part because it hurts workers and small businesses.

Despite objections from so many, the Obama administration is moving ahead with the proposed rule. U.S. Sen. David Vitter (R-La.) sent a letter to the Department of Labor in September urging Labor Secretary Thomas Perez to extend the public comment period. To date, this has not happened and requests for comment for this story were unanswered.

Israel Ortega is a Senior Writer for Opportunity Lives. You can follow him on Twitter: @IzzyOrtega