New federal overtime rules that would have affected how some body shop owners reimbursed their employees have been delayed. In November, before the new rules could take affect, an injunction from a federal judge in Texas put at least a temporary stop to plans to alter the Fair Labor Standards Act’s so-called white-collar overtime provision.
Judge Amos Mazzant III was acting at the request of business organizations and 21 state attorneys general that had sued to block the rules permanently.
“We are very pleased that the court agreed with our arguments that the Obama administration’s new overtime rule was unlawful and stopped rule from taking effect on December 1,” said Randy Johnson, senor vice president of labor, immigration and employee benefits at the U.S. Chamber of Commerce. “If the overtime rule had taken effect, it would have resulted in significant new costs – more than $1 billion according to the Congressional Budget Office – and it would have caused many disruptions in how work gets done. Furthermore, the rule would have reduced workplace flexibility, remote electronic access to work, and opportunities for career advancement. This is a great result.”
Back in May, the Department of Labor announced regulatory changes that would have require certain previously exempt employees to be re-classified. The new rules (which would have gone into effect on Dec. 1) would have raised the minimum salary threshold from rom $23,660 ($455 per week) to $47,476 ($913 per week) to qualify as exempt from overtime requirements. The highly compensated employee threshold was raised from $100,000 to $134,004. The salary threshold was also set to be updated every three years.
The Obama Administration estimated that roughly 4.2 million workers would have seen their salaries increase under the new rules.
The administration filed an appeal on Dec. 2, but the briefing schedule for the appeal extends into February, when there will be a new president in office. According to a Department of Labor statement released announcing the appeal: “The Department strongly disagrees with the decision by the court. 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 change leaves business owners struggling to determine salary levels and compensation plans for next year while they wait to see how the judge’s ruling (and any changes that may come under President-Elect Donald Trump) will alter the regulations. Congressional Republicans have also said they planned to rescind the rules in the next term.
Because of the timing of the injunction, some business (including Wal-Mart) had already announced salary increase to keep employees exempt from the changes, or informed employees that they would be converted to non-exempt and could receive overtime. A few companies had even already initiated new compensation plans in anticipation of the rules change.
Under the proposed rules body shop owners would have to reevaluate exempt employees and either raise their pay, make them eligible for overtime, transition them to hourly pay, or re-align work hours. Those employees would also have to be evaluated to see if they pass what’s known as the duties test, as exempt employees must have management responsibilities in order to qualify.
For more on how the rules could affect shops, see our previous coverage here, and the Automotive Service Association’s webinar on the rules changes here.
