New federal overtime rules were set to kick in in a week, but that is all in jeopardy as a Texas judge rules that the Obama Administration overstepped its bounds.
Following several lawsuits from business groups, state attorneys general, and employer advocates, a federal judge granted an injunction halting a new rule that expands who receives overtime.
As part of his intention to overhaul the American workplace, President Obama and the Labor Department rushed regulation that more than doubles the salary threshold of American workers who can receive overtime pay from $23,660 to $47,476 a year. As a result, more than four million workers would now be eligible to earn time-and-a-half pay.
U.S. Texas District Judge Amos Mazzant opined that that Obama and has Labor Department majorly overstepped their bounds by overstepping Congress and it placed a heavy financial burden on various public and private employers:
“With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”
The Administration is irate:
“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 agency 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.”
This move buys time both for Congress and the new Trump Administration to act and comments by President-Elect Trump indicate that we could see a permanent response.
All employers are required to comply with this new rule, but given the short time frame to implement the HR changes, many companies have been scrambling. Large employers like Walmart already boosted the pay for managers who would have been affected. Other employers have shuffled staff from salaried to hourly, doled out pay raises, and promoted staff. That worked out for some workers, but not for everyone as the Wall Street Journal learned from one affected worker:
For Darius Burnette, a JLP accountant who normally works a 45-hour week, the new arrangement has brought a fatter paycheck but less flexibility. “I like making more money for the same work I was doing,” said Mr. Burnette, whose take-home pay is up about 20%. As an hourly worker, he isn’t paid for days—or hours—he doesn’t work.
Not only does the overtime rule present an accounting and HR nightmare as employers sift through workers to give out arbitrary raises not based on performance but government dictation or change worker statuses to a more inflexible work arrangement, it also does take into account the cost burden that varies by region. A one-size-fits-all threshold increase applied nationwide does not take into account difference in cost of living in different areas.
As we wait to see what happens, now that the rule has been delayed, what is most eye-opening is the response of workers who would stand to see a pay increase and the responses from their colleagues. Earning a bigger paycheck is great, but arbitrary increases are not earned. What happens in the office when less skilled, less experienced workers suddenly get a pay raise or promotion, not by skill or hard work, that passes by colleagues who earned it through merit? While everyone wants her colleagues to do better, workers may feel as though their work is suddenly devalued – and they’d be right.