Just about a week before drastic changes were to affect federal overtime wage laws, a federal judge in Texas granted a preliminary injunction against mandatory overtime pay for those making less than $47,476 annually. The new rule would have made about 4 million workers nationwide eligible for overtime pay, but it was delayed last week after 21 states sued the U.S. Department of Labor.
Non-exempt employees who earned under that amount would have been owed time-and-a-half pay for working more than 40 hours a week, starting Dec. 1. Now the pay level will revert to the previous scale with a baseline of $23,600. That scale has been in place since 2004.
According to Rachel Beck, government affairs manager for the Colorado Springs Regional Business Alliance (which is changing its name to the Colorado Springs Chamber of Commerce & EDC in December), the RBA was concerned about how the law would impact local labor costs, especially when combined with Colorado’s Amendment 70, which was passed by voters earlier this month. Amendment 70 will raise the minimum wage from $8.31 to $9.30 per hour in 2017 and then increase it 90 cents each year until the wage reaches $12 in 2020.
“We were hearing from our members that they were concerned about what this would do to their labor costs, particularly since this was happening at the same time as the increase in the minimum wage,” Beck said. She said RBA member businesses have been most concerned with how to comply. Many, Beck said, had already taken steps to prepare for the Dec. 1 implementation date.
“It’s pretty tough to give an employee a salary increase and then change it again,” Beck said of challenges those businesses are now facing. “Lots are trying to make it work.”
According to an article posted on Fortune.com, “Now things are likely to get even more confusing. The preliminary court injunction must first become an official injunction, which will require additional court hearings within the next 60 days, legal experts say. During that process, the Obama administration could decide to appeal the judge’s decision to the U.S. Court of Appeals for the Fifth Circuit, which would have jurisdiction for this case. (Already the DOL has said it “strongly disagrees” with the court’s decision, and is considering all its legal options.)
“Yet even on an expedited basis, an appeals court review could also take months,” Fortune.com reports. “And while legal experts say they expect the appeals court, which reportedly tends to oppose the Obama administration, to uphold the lower court ruling, that can’t be taken as a given.”
According to the RBA, the businesses that implemented changes in anticipation of the law taking effect have two options: Continue to pay employees at these new rates or compensation structures; or make additional changes to future pay, including reverting to a previous rate or pay structure.
Businesses should consult their human resources departments or attorneys for advice, according to the RBA.
Beck said employers need to prepare and have strategies in place should they have to implement compensation changes quickly.
“The injunction could be lifted and the new salary threshold could take effect with little or no warning,” according to the RBA.
In June, Andrew Volin, an attorney with Sherman & Howard in Denver, told the Business Journal the law was anti-business.
“It’s going to create more complexity for payroll administrations and more risk for litigation in the employment arena,” he said. “It will increase the costs for insurance to cover those claims, and the government’s primary objective to give people a raise will be met with frustration and more general discontent for the its ability to serve the people.”
Wage lawsuits have increased more than 400 percent since 2000 because successful employee collective action suits pay double damages and attorney’s fees, Volin said.
Benjamin Hase, staff attorney with the Mountain States Employers Council, said larger businesses would have the hardest time adapting.
“If they get it wrong, it has class action written all over it,” he said. “I anticipate a lot of trial and error.”
Hase said additional costs to the employer because of the rule could mean an increase in the costs of goods and services.
“One option for those affected by the new rule would be to increase their prices,” he said. “If you can’t control your labor costs, and you want to stay in business, you have to make it up somewhere.”