Twenty states that objected to new federal overtime rules were granted their wish Tuesday when a judge prevented the U.S. Department of Labor from requiring businesses to pay time-and-a-half to employees who worked more than 40 hours a week and earned less than $47,476 per year.
The rules would have applied to an estimated 4.2 million workers, including many in foodservice. Salaried workers who thought they were going to be eligible effective Thursday (Dec. 1) will now have to wait for either a final ruling or Congressional action.
The injunction issued by U.S. District Judge Amos Mazzant III means that hourly cooks and waitstaff will continue to receive overtime while salaried workers such as sous-chefs and shift leaders continue to be classified as management. The decision comes as a blow to the Obama administration, which sought to revise the “duties test” used to determine eligibility. Since 2004, salaried individuals who earned more than $23,660 ($11.30 per hour) were not eligible for overtime. The rate was so low that fast food companies often promoted a line worker to manager to pay a lower salary compared to the hourly rate and exempt the company from overtime. Many tearooms employ managers under the threshold.
“Employers that made big changes in their workforce ahead of the rule’s Dec. 1 effective date—either by raising managers’ salaries to the newly set threshold for overtime pay or eliminating job categories like assistant manager—say they aren’t yet planning to reverse course, while others are taking a wait-and-see approach,” reports the The Wall Street Journal.
Judge Mazzant, in a 20-page injunction, found the Labor Department “exceeds it delegated authority and ignores Congress’s intent by raising minimum salary level such that it supplants the duties test.”
In a press release, David French, the National Retail Federation’s SVP for Government Relations, called the overtime rule “a reckless and aggressive overreach of executive power.” He said “retailers are pleased with the judge’s decision. The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect. We hope the judge ultimately finds in our favor, and in the meantime this timeout gives Congress a chance to take another look at the impact of these rules.”
In a statement, the Labor Department wrote that “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 department’s overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”
Rob Green, executive director of the National Council of Chain Restaurants, told QSR magazine “the regulatory ‘timeout’ imposed by Judge Mazzant should allow Congress to vote to stop the regulation once and for all and would also let the incoming Trump administration create a more realistic and workable overtime solution based on sound economic considerations.”
The U.S. Chamber of Commerce, which led one of the suits, said it is pleased with the outcome. “If the overtime rule had taken effect, it would have resulted in significant new costs,” disrupted work, and reduced workplace flexibility, said Randy Johnson, a SVP at the Chamber.
Even without court action, the fate of the rule was far from assured. It could face a strong challenge from President-elect Donald Trump, who has vowed to roll back business regulations, reports The Wall Street Journal.