Jessica Pfenning on January 25, 2017
Overtime Overruled? Federal Judge Halts Obama’s Overtime Rule
Overtime for white-collar workers has recently been a hot topic. In May 2016, President Obama announced a proposed policy that would extend overtime pay for over four million American workers. But this didn’t go over without scrutiny.
The overtime rule that would have gone into effect on December 1, 2016, was officially blocked in November by U.S. District Judge Amos Mazzant, in Sherman, Texas. This could have some profound implications for many small businesses. If you have employees who are classified as white-collar workers, consider how this will impact your company.
Background on the Policy
A previous post in May discussed the upcoming changes to the Department of Labor’s overtime regulations. Since 2004, the salary threshold for white-collar overtime workers was $23,660, which was under the federal poverty level for a family of four.
Under President Obama’s new policy, the exempt salary threshold would increase significantly to $47,476. The goals were to ensure that hard-working Americans received an honest day’s wage and to keep up with inflation.
The Policy is Met with Resistance
Of course, the policy wasn’t popular with everyone. According to The Society for Human Resource Management (SHRM), “Twenty-one states and the U.S. Chamber of Commerce asked a Texas court to bar the overtime rule from taking effect.”
The primary reason for this resistance is that many business groups feel the new policy would increase their government costs dramatically and create financial hardships for many private employers. This could ultimately trickle down to increased layoffs, which would actually hurt the employees the policy was designed to help. The end result was federal judge Mazzant blocking the overtime rule.
It’s important to note that the proposed overtime rule has not been stamped out. There’s still definitely a chance that it will go into effect at some point. The SHRM even suggests that employers should be prepared to follow it exactly as it was written.
However, with Donald Trump taking office in January, it’s reasonable to think that the rule could be dropped or at least appealed. Sources say that Trump is a proponent of a small business exception. An article on Fortune says, “Trump told the website Circa that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president, perhaps by exempting small businesses or delaying implementation.”
What Does This Mean for Your Business?
It’s hard to say for sure what the final outcome will be on the overtime rule. Although it’s likely that the rule’s impact will be limited, it could be years before employers are out of the woods completely in terms of an increased salary threshold for white-collar workers. For the time being, you should plan on complying with the rule.
The back and forth on issues like this can be frustrating for employers. But staying up-to-date on recent news is vital for keeping your business compliant. Be sure to stay informed on this topic if this overtime rule directly impacts your company.