A U.S. District Court judge has granted an injunction to stop the Department of Labor’s (DOL) overtime rule, which was set to go into effect Dec. 1. The judgment pauses a rule that would have impacted 4.2 million American workers by guaranteeing overtime pay to salaried workers making $47,476 per year ($913/week) or less.
If the injunction were not granted, senior living providers would have been forced to begin tracking hours of salaried employees within the rule’s compensation limits and begin paying overtime for hours beyond 40 within a work-week. Overtime pay is defined as 1.5 times a worker’s regular rate.
Senior living providers were reeling after the final rule came out earlier this year, with many large organizations foreseeing a potential financial impact of “hundreds of thousands of dollars more a year in wage costs.” The final rule would increase the minimum salary level for exempt employees up from its current level of $23,660 annually, or $455 per week.
A lawsuit to block the December 1 implementation date was filed in Texas on behalf of 21 states. Critics of the rule have said it will cause undue administrative burden on businesses and add steep wage costs. Proponents of the overtime rule argue it benefits workers who work more than 40 hours per week.
Senior living providers enacted different strategies before the injunction was issued, including switching some workers to hourly from salaried compensation and cutting hours to avoid overtime pay. Several senior living industry groups spoke out against the rule when it was first proposed. It seems those outcries may have been heard.
The U.S. Chamber of Commerce, which represents the interests of more than 3 million U.S. businesses of all sizes and local and state chambers and associations, voiced its support of the outcome.
“We are very pleased that the court agreed with our arguments that the Obama administration’s new overtime rule was unlawful and stopped rule from taking effect on December 1,” U.S. Chamber of Commerce Senior Vice President of Labor, Immigration, and Employee Benefits Randy Johnson said in a statement. “If the overtime rule had taken effect, it would have resulted in significant new costs – more than $1 billion according to the Congressional Budget Office – and it would have caused many disruptions in how work gets done. Furthermore, the rule would have reduced workplace flexibility, remote electronic access to work, and opportunities for career advancement. This is a great result.”
Industry group Argentum noted that the decision is preliminary, and, while the rule will not go into effect Dec. 1, the final outcome is still up in the air, pending a full hearing on the issue’s merits and a potential appeals process.
“Providers are encouraged to still have a plan in place to be compliant with the new rule, pending the outcome of the appeal,” Argentum wrote to its members.
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Judge Amos Mazzant III of the Eastern District of Texas concluded that the rule should not go forward, citing several reasons.
The original intent of the overtime rule under the Fair Labor Standards Act (FLSA) is to apply exemptions based on duties rather than strictly on salary levels, and the DOL’s rule change would have placed a sole emphasis on salaries, he wrote. The injunction is appropriate because if the rule were to take effect as planned, it could cause “irreparable harm” and could “have a detrimental effect on government services that benefit the public,” particularly for services provided by state agencies with budget constraints.
The injunction applies nationwide, and will be in place until the judge rules on the merits of the case.
At least some believe that Mazzant will go on to strike down the rule on the merits, given his language in granting his injunction, the New York Time reported. Still, companies that already have taken action in anticipation of the rule, such as by raising salaries to avoid paying overtime, may find it impossible to roll back the changes.
A further complication is that the administration of President-elect Donald Trump could take action to strike down or alter the rule. This would be in keeping with his stated intention to roll back regulations, but could run counter to his promises to represent the interests of working class voters, the NYTimes noted.
Argentum agrees the incoming Republican-controlled Congress and new Trump administration could impact the final rule. However, the outcome is uncertain.
“There are four bills in the current Congress to entirely roll back or modify the rule,” Argentum wrote to its members. “The next Congress could reintroduce legislation that President Trump would most likely sign into law. President Trump could also restart the regulation as a way to rescind or modify the rule. However, a legislative or regulatory fix are not guaranteed, and both could take months to years to accomplish.”
And some opponents of the rule have said they would be open to a changed version, such one with as a less extreme increase in the salary threshold for overtime.
The DOL “strongly disagrees” with the ruling, according to a statement issued by the agency.
“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,” the statement reads. “We are currently considering all of our legal options.”
Written by Amy Baxter