Millions of workers in limbo after rule expanding overtime pay eligibility is put on hold
As an education specialist for a museum in Kansas City, Mo., Cherie Kelly says it can be tough to keep her work schedule to 40 hours a week.
On weeks with evening events or special programming, she might have to put in closer to 60 hours — something she says happens about once a month. She was looking forward to earning some extra money through overtime pay soon, thanks to a federal rule that was slated to kick in this week.
But she and many other workers are now in limbo after a federal judge in Texas ruled last week to halt an overtime rule that was supposed to take effect Dec. 1.
The Labor Department rule, which would have made overtime pay available to more than 4 million additional workers, was challenged in court by a number of business groups and a collection of states. The judge ruled that the department exceeded its authority when it more than doubled the salary limit that determines which workers should be made eligible for overtime pay.
“Now with the regulation on hold, their better paychecks and better work life balances are on hold as well,” said Judy Conti, federal advocacy coordinator for the National Employment Law Project, a nonprofit organization that advocates for workers.
The rule would have made overtime pay an option for full-time salaried employees earning up to $47,476 a year — substantially more than the current threshold of $23,660 a year. The rule hadn’t been updated in 12 years.
But business groups, states and other employers expressed concerns that the higher income threshold would hurt their bottom lines, disrupt their business models, or limit opportunities for employees.
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The Labor Department said it strongly disagreed with the court’s decision and is currently reviewing its legal options.
The timeline for when the court will reach a final decision depends on what the department does next, legal experts say. If the Labor Department challenges the injunction as expected, some consumer groups said they are worried that the rule advocated by President Obama may not survive under the next administration. One scenario is that the Labor Department under President-elect Donald Trump could decide to drop the case, putting an end to the rule, says Ross Eisenbrey, vice president for the Economic Policy Institute, a left-leaning think tank.
As a result, Eisenbrey said, the institute is researching options for becoming a party in the lawsuit so that it could continue the case even if the Labor Department drops out. “That shouldn’t be the end of the matter,” he said.
The last-minute delay of the rule, which was halted less than two weeks before it was supposed to go into effect, created confusion for some employers that have spent the past several months preparing for the regulation. Some companies offered raises to managers so that their salaries would be above the proposed threshold. Other workers were set to become eligible to be paid time-and-a-half on any time worked beyond 40 hours a week.
However, the adjustments didn’t always involve bigger paychecks. Some workers were moved from salaried jobs to hourly roles, meaning they would have to clock in and out. Other employees were set to start working fewer hours.
Many employers said after the ruling that they would move ahead with changes even though the future of the rule is murky. TJX, the parent company for T.J. Maxx and Marshalls, said this week that it would “move forward as planned” in implementing the changes required by the rule, without elaborating on what those changes would be. Walmart in September raised the salaries of its entry-level managers to $48,500 from $45,000 to bring them above the threshold for overtime pay and said this week it has no plans to change course.
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Other employers are taking a wait-and-see approach until they learn more about whether the rule will survive, leaving some workers unsure of what will come next.
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