What’s Next for Obama’s Overtime Rule?

This piece originally appeared on Bloomberg News

By Chris Opfer,Tyrone Richardson and Ben Penn

Nov. 23 — A judge’s unexpected decision to put the Labor Department’s new overtime rule on hold raises complicated questions for congressional Republicans and the incoming Trump administration about what to do now.

Judge Amos Mazzant ruled Nov. 22 that the DOL exceeded its authority by focusing on workers’ salaries to determine whether they’re eligible for overtime pay ( Nevada v. DOL, E.D. Tex., No. 4:16-cv-00731, motion granted 11/22/16). Instead, the judge said the department should look more closely at the duties that employees actually perform to see if they qualify as “executive, administrative, or professional” workers exempted from overtime requirements.

The decision seems to mean that it’s up to lawmakers in Congress to amend the Fair Labor Standards Act if they want to raise the salary threshold for automatic overtime eligibility from the current level, about $24,000 per year. But President-elect Donald Trump’s administration is expected to also consider publishing a new regulation to either tweak the one on hold or scrap it altogether.

“We know that some members wanted to take the authority here legislatively,” Evan Armstrong, who lobbies for the Retail Industry Leaders Association, told Bloomberg BNA Nov. 23. “But that was not a uniform position for members of Congress, so we’ll have to see how they react going in the next year.”

The overtime rule (RIN:1235-AA11) was expected to make some 4 million workers newly eligible for overtime pay. It would do that by doubling the salary threshold—up to nearly $48,000 a year—under which employees are automatically entitled to time-and-a-half wages for all work hours beyond 40 per week.

Threshold Questions

Mazzant’s take on who has the authority to set the salary threshold wasn’t entirely clear. Congress intended for the DOL to focus on job duties—not salary level—in setting eligibility standards, the judge said. However, he wasn’t going to weigh in on the existing threshold, which the department established via regulation in 2004, he said.

When the DOL rolled out the new overtime rule in May, the department said it would focus primarily on salaries. Workers who make more than the threshold amount are still entitled to overtime pay if their job duties don’t qualify as managerial, but the department said raising the threshold was a much easier way to bolster paychecks.

A large swath of mostly Republican lawmakers and employer organizations have argued the threshold increase was too much too fast and that it would cause small businesses, educational institutions and others to cut jobs in the face of rising payroll costs. Critics in Congress focused on legislation to delay or block the rule, but many also said they believed the threshold level should still be raised—but to a more moderate level.

“That bottom level was too low, there’s no question about it,” Rep. Phil Roe (R-Tenn.) told Bloomberg BNA shortly after the November elections. “But doubling that was way too much and a bridge too far.”

A House GOP staffer speaking on condition of anonymity told Bloomberg BNA Nov. 23 that the current thinking is lawmakers will look to the Trump administration on how to proceed. They’re also likely to try to scrap the rule completely, using the Congressional Review Act challenge currently pending in the Capitol.

“It will be going back to the drawing board and it’s just too early to say what we will do,” Matt Haller, senior vice president of public affairs at the International Franchise Association, told Bloomberg BNA Nov. 23. “The political dynamics has changed and I think something is appropriate, but it’s just too early to say what that is.”

The IFA is one of the business groups challenging the rule in court. It’s also part of a coalition of employer-side organizations that has been lobbying against the new regulation in Congress.

Trump has made clear that he intends to slash government regulations when he moves into the Oval Office in January. He’s also expressed some concern about the overtime rule’s impact on small businesses, but it’s not clear whether he would be willing to revert to the $24,000 threshold.

Representatives for the Trump transition team didn’t immediately respond to Bloomberg BNA’s request for comment.

Second Ruling Against DOL This Month

The rule is the latest setback for labor unions in recent weeks. A federal judge Nov. 16 blocked a separate DOL rule that would have forced employers to disclose the hiring of consultants to fight a union drive.

Labor organizations such as the Service Employees International Union, a main supporter of national efforts to raise minimum wages, and the AFL-CIO say the overtime rule is a means of benefiting middle-class workers.

It was not immediately known Nov. 23 whether the unions will seek new avenues to champion raising the overtime threshold. Officials at both the AFL-CIO and SEIU didn’t respond to Bloomberg BNA’s request for comment Nov. 23.

AFL-CIO President Richard Trumka Nov. 23 tweeted criticism of the preliminary injunction. He vowed that “the fight does not end here.”

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