Is overtime pay change dead, or just on hold? Idaho employers cautious after injunction

Department of Labor: "Overtime - it’s about time"

This video from the U.S. Department of Labor explains the updated salary threshold rules issued by the Obama administration that would guarantee overtime protections to about one-third of salaried workers.
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This video from the U.S. Department of Labor explains the updated salary threshold rules issued by the Obama administration that would guarantee overtime protections to about one-third of salaried workers.

Nearly 2,000 Idaho state employees were in the process of being converted from salaried to hourly wages ahead of a new federal rule on overtime pay set to take effect Dec. 1.

That all changed Tuesday with the news that a federal judge in Texas granted an injunction against the changes, said Susan E. Buxton, administrator for the state’s human resources department.

The state has suspended its switch until the courts decide the rule’s fate, she said.

“We’re going to just watch and see what the next steps are for the court,” she said. “It’s a preliminary action, not a permanent one.”

Many Idaho employers previously interviewed about the overtime change couldn’t be reached for comment Wednesday as businesses and employees prepared for the Thanksgiving holiday. But employers here and across the country appear to be approaching the matter with caution amid the pending lawsuit and the transition to a new president.

The regulation sought to shrink the so-called “white collar exemption” that allows employers to skip overtime pay for salaried administrative or professional workers who make more than about $23,660 per year. Under the rule, those workers would have been eligible for overtime pay as long as they made less than about $47,500 a year, and the threshold would readjust every three years to reflect changes in average wages.

In Idaho, estimates of workers affected by the change ranged from 20,000 to 64,000. The Economic Policy Institute says this state has 219,000 salaried employees.

The U.S. Department of Labor said the changes would restore teeth to the Fair Labor Standards Act, which it called “the crown jewel of worker protections in the United States.” Inflation weakened the act: Overtime protections applied to 62 percent of U.S. full-time salaried workers in 1975 but just 7 percent today.

The lawsuit’s plaintiffs, though, argued the Labor Department acted beyond its authority under the Fair Labor Standards Act, which was the basis for the change.

U.S. District Judge Amos L. Mazzant agreed, saying that the department has leeway to define which employees are eligible for overtime pay based on the duties they perform, but not the salary level.

Kevin Settles, CEO of Bardenay Restaurant and Distillery sites in Boise, Eagle and Coeur d’Alene, was among the Idaho employers who sent feedback to the U.S. Department of Labor last summer. Then, he said the rule would force salaried employees to become hourly.

But in its final form, the rule wound up affecting only a handful of his employees — “Not nearly as bad as what we’d been expecting,” he told the Statesman in May.

Most salaried workers were already above the new threshold, and those who weren’t typically work 40 to 45 hours per week, he said Wednesday.

“We discovered a few worked more hours,” he said. “A few wanted to switch to hourly, so we did.”

The injunction will give Bardenay more time to figure out its plan for one employee under the wage threshold who preferred to be salaried, Settles said.

“At the end of the day, it will affect one employee,” he said.

The injunction is good news for small businesses, said Pam Eaton, president and CEO of both the Idaho Retailers Association and the Idaho Lodging and Restaurant Association.

The rule was going to force association members to limit hours, cut base pay and switch some salaried employees to hourly, reducing scheduling flexibility, she said.

“It was also causing some businesses to look at increasing prices to their consumers,” she said. “The injunction gives businesses some breathing room and allows the employees to continue working in more flexible environments with room to grow, which is what attracts many employees to these industries to begin with.”

Rule could be reversed, but pay increases may stick

The impending rule wasn’t front and center in the presidential campaign, but President-elect Donald Trump did tell the news site Circa in August that he would love to see a delay or carve-out for small businesses in the overtime regulation. Republican House Speaker Paul Ryan was more vocal against it, saying it would be an “absolute disaster” for the economy and was being rushed through by President Barack Obama to boost his political legacy.

Because undoing the regulation could have required a months- or yearslong rule-making process similar to the one that produced it, the new overtime limit appeared likely to survive in some form. Some business lobbyists had anticipated a legislative compromise that phased in the new limit over a longer period of time and eliminated an automatic increase in the limit every three years.

The injunction would appear to make such a reprieve far less likely, although the question remains whether the Trump administration will seek a legislative deal that would raise the salary limit above the $23,660 that has prevailed since 2004, but below the Obama administration’s preferred level.

Supporters of the regulation have observed that the politics of essentially withdrawing a planned salary increase from many workers could prove complicated for an incoming president elected on a message of improving workers’ economic circumstances.

Further complicating the picture is the fact that many large employers have already raised the pay of some employees over the new $47,476 limit, concluding that it would be more cost-effective than paying them overtime. It is rare for employers to reverse such pay increases, making large employers potentially sympathetic to an overtime compromise that would effectively extend the salary increase to some of their smaller rivals.

The ruling also dealt a late blow to Obama’s effort to build a legacy based largely on his use of executive power.

He moved without Congress on climate, immigration and foreign policy, gambling that his successor would preserve his actions. Trump’s election all but guaranteed that much of Obama’s work will be undone.

Much of the legal opposition to Obama took root in Texas; the state has sued the administration more than 45 times, and its attorney general co-led the overtime lawsuit.

The Statesman’s Erin Fenner contributed.