Pay Concerns Force Judge To Halt OT Rules

Over 4 million private workers in the U.S. were expected to see a pay boost from President Barack Obama’s overtime rule.

It was set to take effect this week.

That’s on hold, however, after a federal judge blocked the rule Tuesday which would have increased the salary threshold that a person could receive overtime pay. A nationwide injunction was imposed by a judge in Texas at the request of 21 states, business groups and the U.S. Chamber of Commerce.

While the administration and the Department of Labor said it would give fair pay for a long work day, business groups and critics believed the new rule would strain budgets significantly. As of now, a salaried worker making less than $23,660 is eligible for overtime pay if they work in excess of 40 hours.

Under the new rule, that threshold would elevate to $47,476. As opposed to the 7 percent that are currently eligible, officials said 35 percent of full-time, salaried workers would automatically be entitled to overtime pay based on their salary. It’s unclear if the rule will stay in place before President-elect Donald Trump takes office.

Locally, Todd Tranum, president and CEO for the Chautauqua County Chamber of Commerce, said local businesses have received information and are aware of the ruling. Tranum said the threshold increase is not only significant for businesses, but also nonprofits. Tranum said there were local businesses that had concerns about the rule and how it would impact their operations.

“I think it really hurts business across the board. Certainly, as you get into some not-for-profits and some smaller businesses, margins are even tighter,” he said. “It certainly complicates their ability to do things they need to do as businesses. I think in an environment where businesses are in global competition in many situations, this is going to put more cost pressure on a lot of them.”

Tranum said the judge’s decision to block the rule will relieve some businesses that were trying to figure out how they were going to manage their budgets. Tranum said it’s possible the salary threshold is addressed in some fashion, but it won’t be one large step at one time. The salary threshold was last updated in 2004.

“There hasn’t been an adjustment in 12 years,” Tranum said. “Something may get done on it, but it’s not going to be as drastic of an increase. I think a more realistic approach would be a gradual adjustment.”

In May, the Department of Labor ordered the rule change as one of the president’s significant labor policies. Following last week’s ruling, the Labor Department issued a statement disagreeing with the judge’s decision.

U.S. Rep. Tom Reed, R-Corning, shared his concerns with the new rule when it was ordered as he said it was a big government overreach, which often plagues small businesses and prevents job creation. Reed said the measure would put more pressure on employers.

“This is something our region cannot afford,” he said. “The president’s new rules aren’t rooted in the reality of economics and doesn’t account for the long-term negative consequences inflicted on the ordinary worker.”