If things had gone President Barack Obama’s way, 4.6 million salaried workers in the U.S. would be waking up this morning newly eligible for overtime pay.
But a federal judge in Texas issued a temporary injunction last week that halts enforcement of the new overtime rule, which was to take effect today.
Now, the rule is in limbo. Workers and their bosses can wonder if President-elect Donald Trump may try to cancel or change it after taking office in January. He indicated he might.
Many St. Louis employers had already prepared for the new rule by changing the way they pay employees. Some junior managers got nice raises, pushing their pay above $47,476 a year, the new rule’s cutoff for overtime eligibility. Other salaried managers were told that they were now hourly employees eligible for overtime.
“For many big St. Louis companies, it’s a huge undertaking,” said R. Michael Lowenbaum, a Clayton labor lawyer who advises companies. “They had to look at everybody’s job.”
With the rule now suspended, workers and their bosses wonder what to do next. Should they put pay back the way it was, or wait and see what happens?
Federal law requires that most employees be paid time-and-a-half for work over 40 hours per week. But it makes an exception for salaried workers whose duties are executive, administrative or professional. Under the old rule, those workers needn’t be paid overtime if they earned more than $23,600 per year, a figure that hadn’t changed since 2004.
Doubling the cutoff means millions of lower-level managers and administrators would be eligible for overtime pay.
States sued to block the rule, and U.S. District Judge Amos Mazzant, an Obama appointee, delayed it last week until the case can come to trial. The judge noted that the Fair Labor Standards Act requires the government to look at what workers do and how they are paid in deciding on overtime. But the big increase in the pay cutoff is “essentially a de facto salary-only test,” he wrote in his 20-page ruling.
The U.S. Department of Labor said in a statement that the injunction denies “a fair day’s pay for a long day’s work for millions of hardworking Americans,” adding that it was confident the rule is legal.
But the judge’s order shifts the question to the incoming Trump administration, which could stop defending the suit or begin the lengthy process of changing the rule.
Trump has said little on the issue. In an August interview with Circa, a news site, he cited the rule as an example of over-regulation. “We would love to see a delay or a carve-out of sorts for our small business owners,” Trump said in the interview.
Actually, businesses with less than $500,000 in annual revenue are already exempt.
Reversing the overtime rule might pose some political risk for Trump, who drew much support from blue-collar voters. Democrats could denounce him for denying overtime to people on the bottom of the middle class.
Only 7 percent of full-time salaried employees are currently eligible for overtime pay, down from 62 percent in 1975, according to the Labor Department. But the effect of the rule would vary widely among businesses.
Schnuck Markets Inc., the Maryland Heights-based supermarket chain, said most of its employees were paid hourly, leaving only about 1 percent of its 14,000-person workforce affected by the overtime rule. The company dealt with those on a case-by-case basis, a spokesman said.
But Wal-Mart Stores Inc., one of the biggest employers in the St. Louis area, handed out raises to all its entry-level managers, raising their pay to $48,500 from $45,000, keeping them exempt from overtime. Those raises will apparently stick.
“We are still reviewing the court’s ruling, but we don’t anticipate making any changes to what we’ve already shared with our associates,” a Wal-Mart spokesman said in an email.
By contrast, the Glik’s chain of more than 60 clothing stores plans to reverse a decision to switch about 10 employees to hourly pay from salary.
Dealing with the rule “was incredibly upsetting,” said Jeff Glik, CEO of the Granite City company founded by his family in 1897. It mainly affected young people just out of college and starting careers.
Glik recalled when he began as a young assistant buyer for a retailer in Houston. “My buyer said to me, ‘You’re my assistant and you’re here when I’m here. I start at 7 a.m. and I work until 6 p.m.’ ”
The overtime rule would make it hard for new people to learn the way he did, Glik said. “I want them to have the same opportunity I had. Go for it. Climb the ladder.”
He and his managers spent about 20 hours and “thousands of dollars” on legal advice deciding how to deal with the rule.
His initial solution was to switch the young grads to an hourly rate so that they work the same 45-hour week while receiving about the same total pay. Now, he’s reversing that.
Glick said his young salaried workers didn’t like the idea of being hourly employees. “It was upsetting for them as well because they didn’t graduate fromcollege for that,” he said.
Lowenbaum, the labor lawyer, is advising clients that have made changes not to reverse them — especially if they gave raises — but to wait to see what happens.
“It’s probably bad for employee morale, and there is no reason to backtrack,” he said.
Even if the rule is reinstated, employers won’t have to grant back pay to workers who exceed 40 hours, said the lawyer, and he doesn’t expect the rule to survive Trump.
“It’s probably dead, I would think,” Lowenbaum said.