A ruling by the U.S. District Courts put the brakes on changes to overtime pay laws Tuesday, Nov. 22, that would have gone into effect Dec. 1 after 21 states and other business groups filed suit against the change.
Currently, under the Fair Labor Standards Act, employers are required to pay time and a half for time worked past 40 hours a week to any full-time employee paid less than $455 a week or $23,660 a year.
Exempt employees are “white-collar” employees who make more than that amount, either paid salaried or hourly, and who pass the U.S. Department of Labor’s duties test.
The wage threshold will be adjusted to include any employee paid under $913 a week or $47,476 a year, meaning many employers will have to pay their employees more money or find ways to trim back. The salary cap is also set to automatically rise every three years.
U.S. District Judge Amos Mazzant issued a preliminary injunction in the case effectively pausing the rule change until a court decision is finalized.
The National Retail Federation (NRF) and Florida Chamber of Commerce are among many business organizations that have taken issue with the rule change. They and the states involved in the suit argue that the change exceeds the Labor Department’s statutory authority under the Fair Labor Standards Act and are in violation of the intent of Congress
“The Labor Department’s overtime changes are a reckless and aggressive overreach of executive power, and retailers are pleased with the judge’s decision,” NRF Senior Vice President for Government Relations David French said in a press release. “The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect. We hope the judge ultimately finds in our favor, and in the meantime this timeout gives Congress a chance to take another look at the impact of these rules.”
According to data collected by the NRF the law change will raise prices higher than the actual benefits of the law change to employees.
Landrum Human Resources Training Specialist Becki Haines explained that the original wage threshold was set in 1975, and the change is meant to account for 41 years of inflation.
“If we were to take what $455 a week was in 1975 and put it in today’s dollars with inflation we are looking at $2,013 guaranteed weekly,” she said. “In 1975, 62 percent of employees were under the salary threshold…8 percent today, so 92 percent of people today would meet the exempt qualification if it was solely based on the salary threshold. You can see that we are light years away from the original intent.”
But the NRF argues that it will only benefit 900,000 of the nearly 4 million employees that fall under the new requirement, and their pay impact would only be about $650 a year.
In addition litigation holding up the law change, legislation currently being considered by the U.S. Senate could postpone the law change to June 1, 2017, intending to give employers more time to prepare for the changes.
The Regulatory Relief for Small Businesses, Schools and Nonprofits Act has already passed the U.S. House of Representatives and has been presented to the Senate for vote. The date of that vote is not yet clear, and President Barrack Obama has threatened to veto the act regardless.