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Millions of Workers Soon to be Newly Eligible for Overtime Pay

In a move to help boost low- and middle-income paychecks, the Obama administration has unveiled a long-awaited rule that will make millions of Americans newly eligible for overtime pay.

While some businesses welcome the measure, many argue that it will simply force them to reshuffle salaries to get around the regulation.

The new rule essentially doubles the threshold at which executive, administrative and professional employees are exempt from overtime pay to $47,476 from the current $23,660. That’s expected to make 4.2 million additional workers eligible to receive time-and-a-half wages for each hour they put in beyond 40 a week.

Labor Secretary Thomas Perez said the salary threshold was originally intended to exempt high-paid executives but instead has denied overtime to low-level retail managers and entry-level office workers who often toil 50 to 70 hours a week, according to a USA Today report.

“Too few people are getting the overtime that [federal law] intended,” he said. “It’s simply not right.”

Vice President Biden called the change a critical part of the White House’s goal of “restoring and expanding access to the middle class. The middle class is getting clobbered.”

The rule represents the administration’s most prominent initiative to lift middle-class wages. President Obama’s call to raise the federal minimum wage from $7.25 an hour to more than $10 has been stymied by Republicans in Congress. The share of full-time workers who qualify for overtime has fallen from 62 percent in 1975 to 7 percent today, according to the administration. The new rule, which would take effect on December 1, would allow 35 percent of workers to qualify.

Many small businesses can’t absorb the added cost and will instruct employees to work no more than 40 hours a week, bringing on part-time workers to pick up the slack, said Dan Bosch, head of regulatory policy for the National Federation of Independent Business. And some businesses likely plan to cut employees’ base pay to offset the overtime, effectively skirting the requirement.

“The Obama rule puts a huge cost and regulatory burden on employers, who will face pressure to cut back on benefits and full-time employees,” says Trey Kovacs, policy analyst with the Competitive Enterprise Institute.

However, U.S. Rep. Mark Takano said it’s “long overdue,” adding that “millions of employees are working long hours without fair compensation.”

The administration, which initially proposed the rule last summer, did make concessions in response to the 270,000 public comments it received. It lowered the new salary threshold to $47,476 from the proposed $50,544.

And it’s allowing employers to apply bonuses and incentive payments to up to 10 percent of the new salary threshold. The threshold also will be updated every three years instead of annually, rising to $51,000 on January 1, 2020.

Deadlocked Supreme Court Blocks Immigration Plan

The Supreme Court recently blocked President Obama’s effort to protect more than four million undocumented immigrants from the threat of deportation, deadlocking 4-4 over a plan that had divided much of the nation.

The tie vote leaves intact lower federal court rulings that stopped the program in its tracks more than a year ago, after Texas and 25 other states claimed the president lacked the authority to go around Congress.

It was a sudden, crushing defeat for millions of parents who came to the country illegally and have lived in the shadows, often for decades. The administration had hoped that at least one of the more conservative justices – possibly Chief Justice John Roberts – would rule that the plan posed no financial threat to the states and, therefore, could not be challenged in court.

Like several other tie rulings since Justice Antonin Scalia’s death in February left the court with only eight justices, the one-sentence opinion simply announced that the court was “equally divided” and unable to muster a majority for either side.

That’s all opponents needed to block the “deferred action” program, which would have offered qualifying parents of children who were born in the United States or are legal residents the right to remain in the country for three years and apply for work authorization. The president, with two lower court strikes against him, needed an elusive fifth vote.

The immigration battle was waged on two fronts before the court: the administration fought with the states as well as with the House of Representatives, which previously blocked the president’s effort to confer legal status to some of the nation’s more than 11 million illegal immigrants.

Obama announced the “Deferred Action for Parents of Americans and Lawful Permanent Residents” program in November 2014. It would extend protections to more than four million parents who meet the criteria, just as a 2012 program did for immigrants brought to the United States as children. More than 700,000 have qualified for that earlier program.

Once qualified, parents also could apply for work authorization, pay taxes and receive some government benefits, such as Social Security. Those with criminal backgrounds or who have arrived since 2010 would not qualify.

Texas challenged Obama’s authority to implement the policy by executive action, rather than going through Congress. Federal district court Judge Andrew Hanen in Brownsville, Texas, upheld the challenge in February 2015 and blocked the program from being implemented nationwide. The U.S. Court of Appeals for the 5th Circuit upheld that ruling last November in a 2-1 decision.

The Supreme Court agreed in January to hear the case, expanding its scope to include whether Obama’s action violated the Constitution’s “Take Care Clause” by failing to faithfully execute the nation’s immigration laws.

In written briefs and oral arguments, the Justice Department contended that the policy only would make official what was happening anyway – undocumented immigrants who do not have criminal records and are not priorities for deportation are generally left alone. The government only has enough funds to deport about 400,000 a year, they said.

Lawyers for Texas and the House of Representatives countered that while the president can decide not to deport individual immigrants, only Congress can defer action on a class-wide basis.

Pennsylvania Governor Abandons Call for Sales Tax Hike

In a shift that could ease the path to a budget deal, Pennsylvania Gov. Tom Wolf said he would no longer seek a hike in the state’s personal income or sales taxes to raise new revenue.

This is good news for the state’s laundry owners, who were facing a potential loss of the sales tax exemption.

Instead, the governor told a Pittsburgh radio station he believes he can achieve his priorities without raising the taxes that hit Pennsylvanians the hardest.

“I’m not asking for a sales tax increase or a personal income tax increase,” Wolf said. “I think we can do all this – a balanced budget, the increase in education and the heroin initiatives – without a broad-based tax increase.”

Such a hike had long been a pillar of Wolf’s plan to boost funding for schools. His remarks signaled the first public acknowledgment that he is softening a stance he had held throughout his 18 months in office, one that fueled acrimony with the Republican-led legislature and last year’s budget impasse.

Backing away from a tax plan does not resolve all differences between the sides. But it takes off the table Wolf’s request for a politically volatile vote that Republicans were set against.

Wolf has also scaled back on his education funding request. The Democratic governor recently said he would accept an increase of just $250 million in the main K-12 education budget line – about $100 million less than he first proposed. He also wants lawmakers to approve $34 million to help treat people who use heroin or abuse opioid medications.

The governor and legislative leaders have said that their talks are going well. As of press time, there was little evidence that a budget deal would be hammered out by the July 1 deadline; however, the last few weeks have brought signs of collaboration, including Wolf’s decision to approve a change in wine sales laws that GOP leaders hailed as a major step toward their goal of privatizing the state-controlled liquor system.

Jeff Sheridan, a spokesman for Wolf, said conversations on a revenue package include talk about new tobacco taxes and proposals to expand gambling in the state. He said the governor was continuing to emphasize a need to close the state’s budget gap with “sustainable, recurring revenue.”

House Majority Leader Dave Reed explained that budget negotiations “are progressing,” and that his caucus is “very happy” that Wolf backed away from his sales or income tax proposals. Reed said both sides are working on alternative revenue proposals.

Bank Regulators Take Aim at Online Small-Business Lending

Small businesses have been a growing source of revenue for online lenders. Now, federal regulators are exploring whether they should intensify oversight of these loan deals.

“These are basically mom-and-pop operations getting very small loans,” said John Williams, president of the Federal Reserve Bank of San Francisco in a recent Wall Street Journal report. “What’s the borrower protection, and what’s the right way to think about it?”

With online or marketplace lending, firms generally connect potential borrowers with loan funders or investors. Marketplace lenders have expanded in part by offering credit to startup firms that may have trouble getting loans from banks. They maintain further regulation could slow or derail the lending process for underserved borrowers.

The leading marketplace lenders originated about $1.9 billion in small-business loans last year, up nearly 60 percent from 2014, according to a Treasury Department study.

The trend is concerning regulators, whose jurisdiction over small-business lending, versus consumer lending, isn’t as clear.

While praising the economic benefits of increased business credit, officials are questioning whether borrowers have the tools to fully assess the terms of their deals, which can come in several different forms, from conventional loans with monthly interest payments to cash advances with upfront fees.

Sometimes, regulators say, borrowers are essentially individual entrepreneurs, yet their loans aren’t treated like consumer loans for regulatory purposes.

Thomas Curry, comptroller of the currency, said his agency, one of the main national bank regulators, was exploring whether it could apply fair-lending rules largely meant to protect minorities and women, and typically applied to consumer contracts, to small-business loans from online lenders that partner with banks.

“We may have jurisdiction over that,” he said.

“Small-business borrowers will likely require enhanced safeguards,” Antonio Weiss, a top Treasury official, told reporters in May as he unveiled a department study of the sector. “There is a clear need for greater transparency in the market for borrowers and investors.”

Some marketplace lenders fear more regulation could hamper growth.

“We have serious concerns that any additional regulation would be both premature and could stifle access to much-needed capital,” said Scott Talbott, senior vice president of government relations at the Electronic Transactions Association, a trade group for the payments industry and marketplace lenders.

Consumer loans face stricter disclosure requirements than business loans. The Truth in Lending Act applies to consumer loans, not business loans, and requires the lender to show the cost to the borrower in terms of an annual percentage rate.

Curry said the Office of the Comptroller of the Currency could apply rules governing “unfair or deceptive acts or practices” to lenders serving small businesses, but the lender would have to be partnered with an OCC-regulated bank, which a growing number are doing.

Online lenders tend to offer a wider variety of credit products than traditional lenders, from short-term cash advances to monthly installment payments, which regulators say can be more confusing for small-business owners.

Another concern for some regulators are the unconventional ways many online lenders use to assess a borrower’s creditworthiness outside of their credit score, and whether those methods are fair.

The Treasury did a sampling of the types of rates offered by three marketplace lenders for small-business loans and found effective APRs spanning from about 7 percent to more than 98 percent.

By comparison, small-business loans offered by banks through the U.S. Small Business Administration have rates ranging from 4 percent to 10 percent. But those loans have stricter underwriting requirements, so not many online lenders offer SBA loans.

Some online small-business lenders say a requirement to disclose fees as APRs would confuse borrowers, especially on credit that extends only a few months or less.

“For consumer loans, it is easy to compare pricing to an annual percentage rate because the loans are generally uniform, but in small-business lending it would be a challenge because there are many different types of loans,” said Kathryn Petralia, co-founder and head of operations at Kabbage, one of the largest small-business online lenders.

Kabbage charges an upfront fee rather than a monthly interest rate.

“We have one fee, so there’s no deception in this case,” she noted.

Chemical Safety Bill Signed into Law

President Obama recently signed the Frank R. Lautenberg Chemical Safety for the 21st Century Act into law, which updates the long-standing Toxic Substances Control Act.

“Seeing this legislation become the law of the land represents the culmination of an incredible journey,” said American Cleaning Institute President and CEO Ernie Rosenberg. “It’s been nearly a decade since the American Cleaning Institute and other voices began calling for modernizing the TSCA, the principal federal chemical safety law.

“We thank President Obama for signing the Chemical Safety for the 21st Century Act and congratulate the bipartisan leaders in both houses of Congress who worked diligently in the trenches to get this bill to the President’s desk. The passage of a bipartisan environmental statute, the first major environmental legislation in 25 years, in the face of partisan pressures is a huge achievement.

The bill repeals the requirement that the Environmental Protection Agency apply the least burdensome means of adequately protecting against unreasonable risk from chemicals, including laundry and other cleaning chemicals. In addition, the bill revises the EPA’s authority to require the development of new information about a chemical by establishing a risk-based screening process.

By specified deadlines, the EPA must designate a certain number of existing chemicals as high- or low-priority for safety assessments and determinations and conduct safety assessments and determinations for high-priority chemicals.

Also, the EPA must prohibit or restrict the manufacture, processing, use, distribution or disposal of a new chemical, or a significant new use of an existing chemical, if the chemical will not likely meet the safety standard, or additional information is necessary to make a safety determination.

If a chemical does not meet the safety standard, the EPA must impose restrictions to assure that it meets the standard, or ban or phase out the chemical when the safety standard cannot be met with the application of those restrictions. In deciding which restrictions to impose, the EPA must take into consideration the costs and benefits of a proposed restriction as well as at least one alternative restriction.

“There is still a great deal of work that lies in front of us to ensure the Environmental Protection Agency implements this law effectively, fairly and efficiently so that the federal program is once again credible,” Rosenberg said.