by Valerie Verkamp
Eight days before the launch of a new rule extending overtime pay to millions of employees, a federal judge in Texas blocked the rule from going into effect Dec. 1.
U.S. District Judge Amos Mazzart ruled on behalf of the State of Nevada and 20 other states who claimed to face imminent monetary loss due to a new Overtime Final Rule.
The policy was put in motion when President Barack Obama directed the Secretary of Labor to update overtime regulations in March 2014.
Indicating it was addressing the president's concern that overtime pay has not kept up with today's economy, the U.S. Department of Labor published a Notice of Proposed Rulemaking in the Federal Register and solicited feedback from interested parties. In response to the proposed rule, the department received more than 293,000 comments.
The Fair Labor Standards Act (FLSA) legally obligates employers to pay their employees a federal minimum wage of $7.25 per hour for all hours worked. FLSA also sets overtime pay at a rate of no less than one and one-half times the worker's hourly rate of pay for anything over 40 hours a workweek.
But when Congress enacted the FLSA 78 years ago, employees performing executive, administrative or professional work were exempt from the overtime protection requirement. Employees performing these types of duties are classified as having “white collar” jobs.
The salary level threshold for exempt white collar employees has increased seven times since 1938.
Modified 12 years ago, the current salary threshold for a full-time employee is $23,660 a year ($455 a week). The new rule would double the salary threshold for exempt employees.
The Final Rule also has a provision that could automatically raise the salary threshold every three years, beginning Jan. 1, 2020.
The Overtime Final Rule would ensure that white collar employees putting in hours above and beyond a 40-hour workweek would be compensated for their overtime, according to the Federal Register. Employers would either need to pay their salaried white collar workers a minimum of $47,476 a year or change their employees' status from exempt to nonexempt by recategorizing the employee as hourly and compensating each employee at a rate of no less than one and one-half times the worker's hourly rate of pay for anything over 40 hours a week.
It is estimated of the 159.9 million wage and salary workers in 2017, 22.5 million will be white collar exempt employees directly affected by the Overtime Final Rule.
Many local employers had conducted a comprehensive review of all jobs and made significant changes to comply with the new rule.
Following the courts motion for a preliminary injunction, many businesses and state governments are now struggling with the decision to either increase the salary threshold of white collar employees to $47,476 a year ($913 a week) or standby until the court issues a final ruling.
The U.S. District Court, Eastern District of Texas, granted the Emergency Motion for Preliminary Injunction following a hearing where 21 states sought to bring the Final Rule to a halt.
According to court documents, the Kansas Department of Corrections and the Kansas Department for Children and Families have a significant number of employees affected by the Overtime Final Rule.
With more than 50 percent of their employees exempt from overtime pay and earning less than the new salary threshold, both state agencies claim they cannot increase their employees' salaries to comply with the new salary threshold due to limited resources.
“As a result, agencies with budgets constraints, such as the two in Kansas, have relatively few options to comply with the Final Rule—all of which have a detrimental effect on government services that benefit the public,” states the opinion of the U.S. District Court.
The court granted a preliminary injunction on the grounds the state plaintiffs will “suffer irreparable harm if the preliminary injunction is not granted.”
In response, the U.S. Department of Labor indicated it will explore all legal options necessary to update the standard salary level.
“The department strongly disagrees 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 Final Rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule,” the department announced.
Brianna Landon, public information officer for the Kansas Department of Corrections, reacted to the ruling this way:
“The (Gov. Sam) Brownback administration has opposed the overtime rule and joined the opposing lawsuit. Recently the rule was enjoined and as a result will not become effective pending further litigation. Like all employers, Kansas need not comply with the rule because of the injunction,” Landon told The Landmark.
In Missouri, the state’s Department of Corrections declined to directly answer how it has prepared for the potential change.
“At this time, the department is closely monitoring the current legal situation and implementation is on hold until a final decision is made,” David Owen, communications director for the Missouri Department of Corrections, told The Landmark on Tuesday.