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Tuesday, 29 November 2016 19:44

Last-Minute Court Ruling Delays New Overtime Rules

Written by Shira Schoenberg, The Republican

A federal judge's ruling in Texas could affect the way Massachusetts businesses calculate overtime pay.

U.S. District Court Judge Amos Mazzant issued an injunction blocking new Department of Labor regulations from going into effect as scheduled on Dec. 1.


The regulations would have increased the number of workers who are eligible for overtime pay by an estimated 4 million workers nationwide.


"We saw this as a necessary change in the spirit of what the overtime law has always been, so we're definitely disappointed with the impact of this ruling," said John Drinkwater, legislative director for the Massachusetts AFL-CIO.


Business groups generally opposed the new rules. "The stay is a bit of good news for employers," said Steve Clark, director of government affairs for the Massachusetts Restaurant Association.


By law, a worker who works over 40 hours a week deserves overtime pay - but not if they are working in an executive, administrative or professional capacity. Under current regulations, a worker must be paid at least $23,660 a year to qualify for that exemption.


The rule proposed by Democratic President Barack Obama's administration would lift the salary threshold to $47,476 annually, or $913 a week. The goal is to make low-paid managers, such as shift managers in fast-food restaurants, eligible for overtime pay when they work more than 40 hours a week.


Advocates for the rule change say it will help these low-income workers earn more money or not have to work excessive hours. Critics say it will hurt businesses, and business owners will simply change the way they pay workers. For example, instead of paying a salary, they might pay an employee an hourly wage that takes into account overtime pay.


The White House estimates that approximately 83,000 Massachusetts workers would benefit from the rule change.


Twenty states, led by Nevada, along with 50 business groups, sued to overturn the rule. They argued that the federal government was infringing on states' rights, and the regulation is not what Congress intended when it wrote the underlying law.


Mazzant, on Nov. 22, ruled in favor of the plaintiffs and granted an injunction blocking the new rules from going into effect.


The ruling throws the future of the law into doubt. Although the U.S. Department of Labor is likely to appeal, an appeal would probably not be decided before Republican president-elect Donald Trump takes office. If the Trump administration agrees with the businesses, it can drop the appeal and let the Texas ruling stand. Trump could also more easily repeal the regulations, since they will not be in effect yet.


Massachusetts business groups opposed the change, although they say the last-minute ruling creates some confusion.


Chris Geehern, a spokesman for Associated Industries of Massachusetts, said his organization had argued that the extent of the change was too radical. "We thought the doubling of the minimum was a little excessive," Geehern said.


But Geehern said if companies already made changes - for example, giving pay raises or making employees hourly rather than salaried - it might be difficult to go back. "We're not telling employers you should go forward with changes you made or don't go forward, it is really up to the best judgment of the employer to determine what kind of effect going back and putting all this stuff on hold is going have on employee morale," Geehern said.


Restaurants are among the businesses most likely to be affected, since many restaurants have low-level managers. Clark said he believes most restaurant workers would be paid the same amount of money but would be reclassified - for example, by being moved from salaried to hourly with overtime pay factored in. Some companies may instead choose to give pay raises or limit worker hours.


Like Geehern, Clark said the restaurant association felt the doubling of the wage standard was "very aggressive." But he said the late change is likely to cause confusion.


"A lot of employers already began having conversations with employees, so it's hard to put the genie back in the bottle," Clark said.


Drinkwater, of the AFL-CIO, said he does not know what most employers will do. But he is disappointed that the salary threshold is now unlikely to change.


Drinkwater said the rules were one way to address growing inequality, in which workers' wages are not keeping pace with the cost of living. "Part of that has to do with hourly wages remaining fairly stagnant in a lot of areas of the economy," Drinkwater said.

"Another big piece of the puzzle is fewer workers are eligible for overtime pay and are essentially working a lot of uncompensated hours."

We would like to thank The Republican for reprint permission.

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