Romney Economic Advisor Andy Puzder Gets Overtime Pay Law Wrong

Andy Puzder is the CEO of CKE Restaurants (Hardee’s and Carl’s Jr.). Bloomberg reported his 2012 salary and other compensation as $4.485 million, so he is doing well in what he likes to deride as the Obama economy.  His restaurant chain is doing well, too, apparently, since its profits reportedly rose more than 30 percent last year. (So much for overregulation!)

But Puzder is opposed to President Obama’s proposal to update the Department of Labor’s overtime rules, an update Puzder claims would turn CKE’s poorly paid assistant managers into “glorified crew members.”  Those rules have been updated only once in the last 39 years and are so obsolete that workers earning less than the poverty level can be considered “executives” and denied overtime pay even if they work so many extra hours that their pay falls below the minimum wage. But that helps Puzder make a bigger profit, so he says leave the rules alone.

One thing is certain: Puzder won’t let any rule change reduce the millions he takes home from CKE. He wants us to know he will take it out of his employees, one way or another. As Puzder says, “overtime pay has to come from somewhere, most likely reduced hours, reduced salaries or reduced bonuses.”

Puzder’s greed aside, there’s a real question about how businesses like his will handle the new rules.  The safest bet is that they’ll do what companies did in the past, and not reduce worker salaries or bonuses, because that would harm employee morale. In the 1960’s and 1970’s, the salary below which employees were guaranteed overtime pay was about $1,000 a week in today’s dollars, wages were growing much faster than they do today, and unemployment was lower. The whole economy worked better and more fairly. Companies absorbed the higher overtime pay or hired more employees.

There’s no law of economics that says Puzder couldn’t raise the price of the sandwiches he sells by a nickel or two to pay for his employees’ overtime. After all, his competitors will all be subject to the same rules. And, he could take it out of his pay, and the pay of his top executives – CEO pay has skyrocketed in recent years as worker pay has flattened.

Puzder claims that a misunderstanding “led Mr. Obama to believe that government should compel employers to pay managers hourly overtime.” But the misunderstanding is Puzder’s, not the president’s. It’s the law that compels overtime for low-level, poorly paid managers. The Fair Labor Standards Act requires that all workers, with few exceptions, be paid extra for their overtime. One of those exceptions is for highly paid executives and was never intended for people like CKE employees paid less than twice a poverty wage. At $36,000 a year, if his so-called executives work 50 hours a week Puzder is paying them only $13.84 an hour – less than the median wage. Once they have the experience and status to be paid $50,000 a year or more, it might be possible to think of CKE’s store managers as executives. But until Puzder values them enough to compensate them as executives rather than as average employees, he ought to pay them time and a half when they work long hours.