The strike-down of an overtime regulation by a Texas judge will affect hundreds of workers along the Coast just in time for the holidays, a labor attorney said.
New overtime rules, promoted by President Barack Obama and the Department of Labor, would have raised the salary threshold beginning Dec. 1 for hourly workers able to earn overtime pay.
The regulations would have limited the work week to 40 hours for any worker making less than $47,476 a year — up nearly 100 percent from the previous threshold of $23,660 a year. And employers would have had to pay time and a half for hours worked over 40.
Nationwide, the rule would have applied to at least 4.2 million workers.
The goal of the rule was to increase pay for middle-class workers or give them more free time. On the Coast, middle-management employees in the casino, hospitality, tourism, hotel and restaurant industries would have stood to benefit.
Judge Amos L. Mazzant III, an Obama appointee, ruled on the behalf of business interests such as the U.S. Chamber of Commerce, which filed lawsuits against the regulation in Mazzant’s Eastern District Texas court.
Mazzant ruled Congress never authorized the department to classify white-collar workers based on salary alone, and the department ignored Congress’s intent by attempting to raise it themselves.
The injunction prevents the new regulation from taking effect right before Christmas.
Fate of rule grim
Although an injunction is a temporary hold, the future of the new overtime rule looks grim, Gulfport labor attorney Steven Cupp said. Immediately after the ruling was announced, Cupp said his law office was “in a scramble” to figure out the impact of the decision.
“We were pretty shocked when we learned about it,” he said. “We knew it would be opposed, but we had thought the Department of Labor went through a pretty intensive process to get at the new rules.”
The night of the ruling on Nov. 22, Cupp and his team of lawyers put together a memorandum that read in part:
“The fate of the overtime rules is now uncertain. The Trump administration will take over the USDOL in less than two months time, and the incoming administration has repeatedly indicated that it wants to eliminate unnecessary regulations hampering the business community. Unless an appeals court reverses course in the next several weeks and breathes new life into the rules, it is quite possible that the rules will be further delayed, completely overhauled, or altogether scrapped once President Trump takes office.”
Now Coast employers are trying to figure out whether to stick with recently made changes or to scale them back. Since the department announced the new regulation in May, Cupp has been consulting with employers on the parameters of the new law, and what it would have meant for them and their employees.
7 percent of full time salaried workers had overtime protections, compared to 62 percent in 1975
Interim Gulf Coast Chamber of Commerce CEO Rachael Seymour said the chamber is waiting to see the outcome of the injunction before making a statement.
“We want to prepare our businesses for the outcome of this decision, but we’re waiting to see what will come of this first,” she said.
In June and September, the chamber held a forum to let members know what to expect with the new rule. Seymour said she expects to have a similar forum in the near future.
While the injunction will likely remain in place, Cupp warns employers to remain vigilant. Those who didn’t abide by the terms of the Department of Labor’s classifications, or who may have mis-classified workers as salaried to exempt them from overtime pay or a 40-hour work week, will still be vulnerable to the enforcement arm of the department.
“I learned a lot of employers weren’t in compliance with the original law when we started looking into this,” Cupp said of the Fair Labor and Standards Act.
“That’s something they’ll want to avoid in the future,” he said.
What will happen next?
▪ The judge can reverse himself, something Cupp called “highly unlikely.”
▪ The judge can make the preliminary injunction permanent and file an order from his court.
▪ The Department of Labor can appeal the decision to the appellate court. It has said it “strongly disagreed” with the judge’s decision and was considering legal options. Cupp said the department will likely ask Mazzano to “certify” the decision, which will open the appeals process.
After the ruling, DOL Secretary Thomas Perez released a statement: “We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”
What will Trump do?
It’s difficult to say what President-elect Donald Trump will do in the short term. While he has consistently said he’s against government regulations in the campaign, a large percentage of working-class voters who might benefit from the overtime regulation helped to put him in office.
“The wild card will be what the Trump administration does with this when they come in,” Cupp said. “They can’t simply do away with it since it’s not an executive order. So there’s going to be a process in place if he (Trump) wants to do away with this. Other than the fact he has been very anti-regulation along the campaign trail as part of his platform, I have not heard he will do away with it.”
But that could change for Trump in the run-up to the inauguration on Jan. 20, Cupp said.
“My sense is that he may not do anything and let it go through the court process,” he said.
Trump’s own history could be the best gauge on what positions he’ll take during his presidency. Trump’s companies have been cited for 24 violations of the Fair Labor Standards Act since 2005 for failing to pay overtime or minimum wage, according to Department of Labor data. A dishwasher in Florida, 48 waiters and dozens of bartenders are among the former employees who have accused Trump and his companies of not paying them for their work.
Trump on Thursday appointed the CEO of CKE Restaurants, Andrew F. Puzder, as labor secretary. Puzder has been an outspoken critic of the new overtime regulation, not to mention raising the minimum wage.
In a 2014 Wall Street Journal opinion piece, Puzder claimed the new rules would end up hurting workers, including fast-food managers who’d be guaranteed overtime pay.
The Wal-Mart model
Some businesses will likely follow the Wal-Mart model, Cupp suggested.
Wal-Mart raised the salary of qualified workers to the new threshold. They’ve decided to keep changes they’ve made in the near future to avoid having to keep stringent time records of employees during the busy holiday season.
Others, he said, have made modifications already and said they’ll likely stick with them.
Still others are taking a wait-and-see approach.
“If you had been waiting until December 1 to implement the changes, you have the option of putting any alterations on ice and awaiting a final determination on the fate of the rules,” Cupp said. “If you do so, you might consider communicating to your workforce that the expected changes are going to be delayed given today’s court ruling, and let them know that you will continue to monitor the situation and make adjustments when and if appropriate.
We pay our employees significantly more than other places. We do it because we think it’s right and also because it gives us an advantage.
Gulf Coast Restaurant Group Vice President of Operations and Human Resources Kevin Fish
“Some employers might find themselves in a difficult spot. If you have already made alterations to your compensation plans or to your employees’ exemption status, it might be unpopular to reverse course now.”
Overall, Cupp advised caution and patience.
“Although you may have the legal right to revert to the status quo, depending on your circumstances, you might consider waiting until a final decision is reached in court, Congress and the White House before doing anything further,” he said.
The salary threshold for qualified workers hasn’t been raised in 12 years, according to the department. The last time the salary threshold was raised was12 years ago during the George W. Bush administration.
Along the Coast
Kevin Fish, co-owner of Half Shell Oyster House and vice president of operations and human resources for the Gulf Coast Restaurant Group, said the proposed overtime rule was too much, too soon.
“I thought it was ridiculous,” he said. “I’d understand if they tried to phase it in over time, but not all at once.”
Regardless, Fish said his company already pays workers who would qualify for the new regulation at or above the new salary threshold of $47,476.
“We pay our employees significantly more than other places,” Fish said. “We do it because we think it’s right and because it gives us an advantage. It’s a custodial responsibility for us.”
Fish also said his company increased the pay of hostesses, dishwashers and other part-time or full-time workers above the federal minimum wage of $7.25. Starting in January, Half Shell will raise pay to $10 an hour, he said.
Advice for employees
Coast employees who stood to gain from the new rule should keep an eye on the news to see what happens next.
Cupp said it’s a good idea for employees to develop a dialogue with their employers, something he said has already taken place in several businesses he deals with.
“Those employees who were expected to benefit should engage in some interactive process with their employer and their human resources department to determine what the company will do, such as will it be put on hold or not,” he said. “They should have an open conversation about that with their employers.
“This is certainly a big victory for business interests. Can you imagine what it’s going to be like for employees who thought this was going to go into effect for them just before the holidays?”
For more information on the law, the Fisher-Phillips law firm has a continually updated analysis of the fate of the overtime rule on their website. More information can also be found on the Department of Labor’s website.