A judge’s surprise ruling throws overtime pay rules into chaos for millions of workers—and for your business
Managers may have to start working some serious overtime themselves in order to understand how to pay overtime to their employees.
A major change in the way employers calculate overtime pay for salaried workers that was to take effect Dec. 1 was blocked last week by a federal judge in Texas, adding confusion and uncertainty to an already contentious issue for many companies.
The new regulation, which would have made more than four million employees eligible for extra pay when working more than 40 hours a week, proposed to raise the salary threshold at which workers are exempt from overtime pay from $23,660 annually to $47,476 a year. The rule was successfully challenged by more than 20 states and multiple business organizations, including the U.S. Chamber of Commerce, which all argued that the changes were too costly and required Congressional approval.
So, now what? To help sort it all out, we checked in with John McKelway, a partner in the Labor and Employment Group at Boston’s McCarter & English.
I guess the first question is, ‘What happened?’ Doesn’t the U.S. Department of Labor have the right to make a change like this?
That’s exactly the issue. Can the labor department make this change through its rule-making function, or should a change of this magnitude be left to Congress? There are other aspects that have been challenged, and one is that the change really created a de facto salary test for the exemption and whether it should be the business of Congress to determine that.