Latest on overtime bill in Congress

See FindLaw Legal News story (from Reuters): “Overtime Pay Faces Showdown in Congress”.

The U.S. Chamber of Commerce “says the changes are needed to update antiquated federal work rules.”

The AFL-CIO says “the notion of going forward with this change is simply counter intuitive” to the sluggish economy because “this change would discourage job creation by allowing companies to make workers work longer hours without additional pay and increase worker insecurity.”

Who is right? IMHO, they both are.

Certainly the law in this area is antiquated, needlessly complex, ill-understood, and frequently violated, and all would benefit from clarification and simplification.

But it certainly is also true that working employees longer hours can be a substitute for hiring more employees, and that the overtime premium requirement is intended to deter the extensive use of overtime. So to the extent fewer employees are entitled to overtime pay, the use of overtime as a substitute for hiring will increase, with a negative impact on overall employment.

An important factor preventing the overtime premium from having the desired deterrent effect is healthcare (and other benefit) costs. Why? Employers will willingly pay significant amounts of overtime rather than hire new employees because of the high costs of benefits associated with having more employees on payroll.

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