A federal judge in Texas has blocked the overtime pay expansion for 4.2 million workers creating a stir among already stressed business owners. Balance Point reported in October about efforts being made by 21 states and business groups to halt or delay the rule. And it seems, for now at least, that they got their wish. On November 22, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted a preliminary injunction challenging the Department of Labor’s authority to raise the salary threshold.
A Look Back
Earlier this year, the U.S. DOL announced the final rule which essentially doubles the threshold at which executive, administrative, and professional employees are exempt from overtime pay, increasing it to $47,476 annually from the current $23,660 established in 2004. The regulation was introduced by the Obama administration as part of a push for better worker protections. Additionally, a mechanism was established to automatically update the salary and compensation levels every three years beginning on January 1, 2020.
To comply, employers were advised by the DOL to raise workers’ salaries above the new threshold, pay time-and-a-half for overtime work, and/or limit workers’ hours to 40 per week. Despite being given 190 days to comply (the deadline was set for December 1, 2016), many felt that it was too great of an increase with too short of a deadline.
Now that the rule has been halted, it has created confusion about what to do next. For now, businesses and employees are on a holding pattern. Here’s what employers need to know:
The decision is not final.
The rule could still be implemented, and it could happen sooner than you think. The outcome depends upon a number of factors: the judge’s final ruling in the case, the position the Trump administration will take on wage and hour issues, and an appeal by the DOL.
In a statement following the injunction, the DOL stood behind its rule, “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 department’s overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule.”
On the day the rule was to take effect, the Justice Department, on behalf of the Department of Labor, filed a notice of appeal in the U.S. District Court.
Consider leaving changes made to comply in place.
Since the injunction was announced only nine days before the rule was to take effect, you may have already made changes to employees’ salaries to accommodate the new threshold. If you’ve already provided or communicated pay increases to employees, it would be difficult and unwise to revert back. You have to consider the affect it would have administratively and to morale.
If you decide to leave the changes in place, then you are in the majority. According to a spot survey Of U.S. retailers conducted by the Korn Ferry Hay Group, more than half (56%) of respondents plan to comply with the rule despite the injunction. The survey also found that 65% who had planned to increase exempt employees to the $47,476 salary threshold still plan to do so.
Hold off on future changes.
If you were considering making changes but have not yet implemented or disclosed them to employees, waiting it out may be your best course of action. Be sure to stay tuned for future developments.
One change you should not put off is implementing time and attendance software. Regardless of the rule and its outcome, time and attendance software like Balance Point’s solution can help you quickly and accurately track employee hours. Doing so helps you minimize human error and time theft, cut down on administrative time, and remain compliant.
Managing overtime is just one page of the book. Benefits like applicant tracking, performance management, compensation and benefits management, workforce analyses, and scheduling are some of the other reasons to make the investment.