Employers no longer have to worry about how to pay some salaried employees overtime, which may not be well-received by some employees.
A federal court decision has blocked a rule that was set to take effect Dec. 1 and require overtime pay for workers earning less than $47,476.
“All those employers can breathe a sigh of relief,” said Madeline Wirt, a partner at the Whelchel, Dunlap, Jarrard & Walker law firm in Gainesville.
The rule crafted by the U.S. Department of Labor would have required overtime pay for about 4 million more administrative and professional workers, nearly doubling the current salary threshold of roughly $23,660. Employers could opt to raise employees above the new salary threshold to avoid paying them overtime.
With the abrupt change so close to the effective date, Wirt said employers may roll back some payroll changes they had made in anticipation of the rule. But some of those changes might not be reversible.
“It would be very hard to undo a raise that’s been promised,” Wirt said.
The Department of Labor said the changes would restore teeth to the Fair Labor Standards Act, which it called “the crown jewel of worker protections in the United States.” Inflation weakened the act: overtime protections applied to 62 percent of U.S. full-time salaried workers in 1975 but just 7 percent today.
The agency said it’s now considering all its legal options.
“We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” the labor department said in a statement. “The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule.”
The ruling dealt a major blow to the Obama administration’s effort to beef up labor laws it said weren’t keeping pace with the times.
The U.S. District Court in the Eastern District of Texas’ preliminary nationwide injunction came in response to a case with 21 states and the U.S. Chamber of Commerce saying such a rule should have been passed by Congress, not implemented by the Department of Labor.
“It’s a district court decision that the Department of Labor exceeded its authority, plain and simple,” said Tim Evans, vice president of economic development at the Greater Hall Chamber of Commerce.
Evans said many small businesses were likely unprepared for the amount of paperwork that would have been required in transitioning employees from exempt to hourly. He gave the example of employees checking email or taking work-related calls at home, which a boss may not have asked them to do. Such a situation, he said, could have led to a “lot of potential for conflict.”
Wirt said receiving such an injunction requires a “substantial likelihood you will prevail on the merits.” She added that the plaintiffs in the case convinced the judge of how much trouble it would cause to have the rule go in place while the trial was playing out and later be revoked.
Wirt said the fact the rule proposed “such a gigantic increase” could have worked against it, as many who support an increase in the pay threshold for exempt employees believe it should have been smaller.
It’s unclear if the overtime rule will eventually still kick in, as President-elect Donald Trump has expressed his opposition to it.
The Associated Press contributed to this report.