Regulation Governing ‘White Collar’ Exemption Fixes Problem that Does Not Exist

In a recent editorial, media personality John Stossel defined government regulation as the “quiet cancer that kills opportunity with an accumulated burden,” which he blames for America’s slowest economic recovery since the Depression.

Stossel points out that American entrepreneurs took advantage of a “ permissionless economy” to create Google, Facebook, Amazon, etc., but he further notes they could accomplish that only because Washington’s bureaucrats didn’t know enough about what they were doing to slow them down.

Today’s regulations are often vague. A typical edict: “The firm shall not engage in abusive practices.” That sounds reasonable, but what is “abusive”? The regulator decides. Compliance is your problem. If you have the misfortune to be noticed by the bureaucracy, or maybe a business rival complains about you, your idea dies and you go broke paying lawyers.

Stossel warns that European regulators have adopted something even worse, called “the Precautionary Principle.” It states that you may not sell something until it has been “proven safe.” That too sounds reasonable, unless you realize that it also means: “Don’t try anything for the first time.”

Stossel concludes the article calling for Americans to fight back, quoting Gen. Douglas MacArthur: “You are remembered by the rules you break.”

We are blessed to live in one of the most innovative and prosperous periods of history because of adventurous, individualistic people willing to take big risks to discover things that might make life better.

The above is a very good description of many of our current members as well as the founders of their companies and this Association. All have fought through past downturns in the ag economy, shortages of supplies and labor, and yes, what most of our members believe to be over regulation. Today’s concerns are different only by the rate and the scope at which small business has come under attack by regulators.

This past week, the public comment period ended for the Labor Department’s proposals to amend the Fair Labor Standards Act (“FLSA”) regulations implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees (known as the “white collar” exemptions).

Manufacturers, distributors and equipment dealers are just some of the small business owners who simply do not have the budget flexibility to increase wages to all EAP employees.

NAEDA wrote in its comments in opposition of the new regulation that in many cases, equipment sales associates (at all levels in the distribution chain) earn an income far in excess of the proposed salary level set forth by the proposed rules. That level is achieved, however, through a base salary that may not meet the minimum salary proposed. Commissions are in place as an incentive for employees to ensure best performance and to, in turn, ensure profits on equipment sales. The “payoffs” for employees are great under the current system. Without this system, sales employees would have little to no monetary incentive to pursue difficult sales.

Sales employees are motivated to work long or unusual hours in the pursuit of sales commissions. Forcing manufacturers, distributors and dealers to pay higher base rates and, therefore, reducing the sales incentives would “fix” a problem which does not exist.

It’s time to be sure your Congressional representatives understand what this and the mountain of other regulations do to small business and our industry. S