LAS VEGAS (AP) — Businesses around the country on Wednesday cheered a court decision blocking the Obama administration’s sweeping new overtime rules, but many had already raised salaries or ordered employees to stick to a strict 40-hour workweek to avoid costs they expected to incur starting next week.
An injunction issued Tuesday by the federal court in the Eastern District of Texas prevents the Department of Labor from mandating overtime pay for salaried employees who make less than about $47,500 a year — a dramatic jump from the old threshold of $23,660.
More than 4 million workers would have been newly eligible for time-and-a-half pay under the rule, which now faces far more uncertainty from Donald Trump’s incoming administration.
The ruling giving businesses a reprieve “is a little late for a lot of people’s taste,” said Tom Gimbel of Chicago-based LaSalle Network, a recruiting and staffing firm that advised companies on how to prepare for the new rule. “A lot of companies had already rolled it out.”
Among them was Opportunity Village in Las Vegas, a nonprofit that teaches vocational skills to people with disabilities and raises its money through private donations and running a thrift store.
Some salaries of clerical workers had already been increased, and Opportunity president Bob Brown said it would be demoralizing for him to take away the pay raises from those workers.
“It’s put us in a difficult situation — you’re spending money you wouldn’t have been spending,” he said.
The Department of Labor last May ordered the changes to give overtime to many more American workers, saying they would “go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work.”
Inflation had weakened the U.S. overtime law passed decades ago, which the agency dubs “the crown jewel of worker protections in the United States.” Overtime protections applied to 62 percent of U.S. full-time salaried workers in 1975 but just 7 percent today.
The court agreed with the rule’s opponents that the labor department overstepped the authority it has from Congress and that the rule could cause irreparable harm if it took effect Dec. 1 as scheduled. The department is now considering its legal options, but Trump will be in charge of the department after taking office on Jan. 20.
While the rule was not a big issue in the presidential campaign, Trump did tell the news site Circa in August that hoped small businesses would get an exception from the overtime rule or be granted a delay in having to comply with it.
The rule’s supporters are now grappling with the major setback and its implications for workers who had been budgeting for more overtime pay starting next week. They’re troubled that low-level retail and restaurant managers who make $25,000 a year but work 60 hours a week can’t log overtime pay.
“This is about the worst news they could get heading into Thanksgiving and the holiday season,” said Vicki Shabo, vice president of the National Partnership for Women & Families.
The fight for overtime pay among administrative, salaried workers has been quiet compared with efforts to raise the minimum wage.
Workers who want to make a good impression on their employers, feel compelled to cover for absent co-workers or are passionate about their jobs often put in far more than 40 hours a week and end up making a sub-minimum wage.
Advocacy groups say the hours those employees spend working for free translate into lost time they could spend with their families or advancing their education to get better paying jobs.
Employers and business groups that stridently opposed the rule have the upper hand over employees who don’t want risk losing their jobs, the advocates say.
“Especially in a bad economy, employers hold a lot of power,” Shabo said. “I think people legitimately have a lot of anxiety about where they stand and how secure their jobs are.”
With the overtime pay order suspended, Trump’s administration could choose to make its own rule changes through a lengthy administrative process. Or Congress could change the country’s labor laws.
Republican House Speaker Paul Ryan, whose party controls both chambers of Congress, had called the rule an “absolute disaster” for the economy and said it was rushed through by Obama to boost his political legacy.
If the labor department lawyers appeal Tuesday’s ruling, they could end up facing a Supreme Court that includes some Trump appointees.
The injunction takes political pressure off the Trump at a good time, said labor law professor Ruben Garcia of the University Nevada Las Vegas’ Boyd School of Law.
With no new overtime changes for American companies starting next week, Trump can accept the status quo and does not risk angering workers by revoking the new overtime benefits shortly after employees start receiving them, Garcia said.