Local interests watch as new overtime rules stall in federal court
New guidelines meant by the U.S. Department of Labor to simplify and modernize overtime regulations, to ensure that extra work means extra pay, were supposed to go into effect last week.
“The rule updated the standard salary level and provided a method to keep the salary level current to better effectuate Congress’s intent to exempt bona fide white collar workers from overtime protections,” department spokesman Jason Surbey said.
Instead, Judge Amos L. Mazzant of the U.S. District Court for Eastern Texas put on hold the guidelines set by the department that would have boosted the salary threshold for overtime from $455 a week or $23,660 a year to $47,476 a year or $913 per week.
In addition, the change from President Barack Obama’s administration to that of President-elect Donald Trump may make the issue moot. Andrew Puzder, who heads the parent company of Hardee’s and other fast food chains, has been named as Trump’s choice to succeed Thomas E. Perez as labor secretary.
“He will save small businesses from the crushing burdens of unnecessary regulations that are stunting job growth and suppressing wages,” Trump stated in his announcement of Puzder’s appointment.
“The new rule will simply add to the extensive regulatory maze the Obama administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere,” Puzder wrote in an op-ed piece run by Forbes in May after the new guidelines were issued. “It will cause some employers to reclassify salaried employees as hourly, and set schedules so they can more easily track hours worked and avoid excessive claims for overtime.”
Greene County native and AFL-CIO President Richard Trumka issued a statement that Puzder’s “business record is defined by fighting against working people.”
Perez’s Department of Labor said 4.2 million workers would gain new protections or get a raise to the new salary threshold, out of 22.5 million now regarded as overtime-exempt.
“The overtime rule renews an important promise of the Fair Labor Standards Act for millions of white-collar workers,” said David Weil, administrator of the department’s Wage and Hour Division, after the guidelines were announced. “A long day’s work should lead to a fair day’s pay.”
However, the doubling of that threshold required to exempt employees from overtime pay drew opposition from business organizations such as the Greater Pittsburgh Regional Advocacy Coalition of Chambers, whose members locally include the Mon Valley Progress Council and Mon Valley Regional, Waynesburg Area and Westmoreland chambers of commerce.
“To be clear, our organizations support increased wages,” the coalition said in a statement released this week. “We believe the way to pursue this, however, is through sustained economic growth and expanding opportunity that leads employers to compete for talent.”
The Redevelopment Authority of the City of Uniontown recently gave its executive director Mark Rafail a raise from $40,000 to $48,000. He said the Department of Labor’s rule was part of the reason.
Also, Rafail said, “I was here for two years and never had a raise, and my board felt it was an appropriate time now.”
Rafail said the board realized that he works without a staff and that a comparison with other authorities found he was at the bottom of the list in terms of salaries.
Does the injunction affect the situation? “I can’t answer that because I haven’t had a board meeting (since the injunction was issued),” Rafail said. He will present a copy of the injunction to the board when it next meets on Dec. 21.
As Rafail noted, the ruling actually is in limbo pending further appeals. Last week, the Department of Labor said it would file such an appeal with the Fifth Circuit Court of Appeals in New Orleans.
Meanwhile, Mazzant’s ruling put a halt to adjustments in salary scales for the State System of Higher Education, including California University of Pennsylvania.
“We have delayed implementing any changes in wages (or) salaries pending the outcome of the court case,” state system spokesman Kenn Marshall said.
Similar watches are taking place elsewhere, including area hospitals.
“The U.S. Department of Labor’s rule expanding overtime protection had very little impact on Monongahela Valley Hospital,” said Corinne Laboon, vice president of marketing and community relations at Monongahela Valley Hospital. “Just like other employers nationwide, we are awaiting the final decision on the rule’s implementation.”
“With this latest development, we are continuing to monitor the progression of these regulations and will closely watch how the salaried overtime rules changes might be affected,” hospital spokesman Joshua Krysak said. “We have plans in place to ensure compliance with these rule variations if and when they should take effect.”
Mazzant issued an injunction Nov. 22 at the urging of state attorneys general from Nevada and 20 other states, including Ohio.
“The state plaintiffs have established a prima facie case that the department’s salary level under the (Overtime) Final Rule (issued in May) and the automatic updating mechanism are without statutory authority,” Mazzant wrote.
Pennsylvania did not join the legal action, but Mazzant ruled that his injunction should be nationwide in scope.
“The Final Rule is applicable to all states,” Mazzant wrote. “Consequently, the scope of the alleged irreparable injury extends nationwide. A nationwide injunction protects both employees and employers from being subject to different EAP exemptions based on location.”
The Mon Valley Alliance has membership in the Greater Pittsburgh Regional Advocacy Coalition through the merger of Mon Valley Progress Council and Middle Monongahela Industrial Development Association.
“I followed the issue from its impact on nonprofit organizations,” Mon Valley Alliance CEO Christopher Whitlatch said Wednesday. “I personally am supportive of employees being properly compensated. I think the federal government may have rushed into this action too soon, and corporations, nonprofits and others are not ready for such a sweeping change.”
Whitlatch said a better solution might be to find a compromise and gradually bring in the guidelines sought by the Department of Labor.
“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,” Surbey said.
The chambers of commerce see it differently, listing “a multitude of ways” employers would be affected by its implementation.
“Many employers covered by the rule will be forced to decide between reducing hours and output or simply eliminate positions to offset overtime costs,” the coalition of 18 chambers said. “In addition, employers will potentially need to purchase and administer costly human resource tracking systems to schedule, track and monitor employee time.”
The coalition also said an automatic annual increase in salary thresholds included in the Department of Labor’s ruling would lead to “unpredictability in budgeting (and) accounting” as well as negative compliance issues.
In addition, the coalition said, “The rule does not take into account benefits provided to employees such as employer-paid health insurance or paid time off in addition to incentives such as profit sharing.”
The Associated Press contributed to this report.