Judge derails changes to overtime rule

Temporary injunction is placed on a much-maligned rule that would have taken effect Dec. 1.

Retailer and pro dealer associations welcomed a judge’s ruling that will prevent the Labor Department’s changes to federal overtime rules from taking effect as scheduled on Dec 1.

U.S. District Judge Amos Mazzant issued a preliminary injunction in a lawsuit brought by the National Retail Federation, attorneys general from 21 states and dozens of business groups arguing that the changes are unlawful. The ruling effectively pauses implementation of the rules until the courts reach a final decision on its legality.

“The Labor Department’s overtime changes are a reckless and aggressive overreach of executive power, and retailers are pleased with the judge’s decision,” NRF senior VP for government relations David French said. “The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect. We hope the judge ultimately finds in our favor; and in the meantime this timeout gives Congress a chance to take another look at the impact of these rules.”

"The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect.”

That sentiment echoed at the National Lumber and Building Material Dealers Association.

“NLBMDA welcomes the preliminary injunction to DOL's overtime rule,” said Jonathan Paine, NLBMDA president and CEO. "The rule in its current form would have had many unintended consequences reducing flexibility and advancement opportunities for employees."

As part of the final rule, the salary level under which employees qualify for overtime pay would have increased from $455 per week ($23,360 annually) to an estimated $913 per week ($47,476 annually). In addition, the rule would have provided for automatic updates to the threshold every three years without seeking public comment.

A recent poll by HBSDealer suggests that dealers were prepared for the switch. At its latest tally, 58% of respondents said they were prepared after studying payroll, work flow and making adjustments. The judge’s action will surely come as a relief to the 13% of respondents who said they were not prepared. Another 13% said they were still working on a plan. (The sample size of the survey was 85.)

The topic was a major talking point at the recent ProDealer Industry Summit in Charleston, S.C.

Research conducted for the NRF by Oxford Economics found that the new overtime regulations would force employers to limit hours or cut base pay in order to make up for added payroll costs, leaving most workers with no increase in take-home pay despite added administrative costs. A separate survey found that the majority of retail managers and assistant managers the regulations are supposed to help oppose the plan, citing losses in schedule flexibility, benefits and professional development opportunities that would come with switching from salaried to hourly positions.

The lawsuit brought by the NRF and more than 50 business organizations argues that both the $47,476 annual minimum salary for workers to be exempt from overtime set by the new overtime rules — more than double the current level — and the automatic increase in that amount every three years exceed the Labor Department’s statutory authority under the Fair Labor Standards Act and are in violation of the intent of Congress.

Mazzant, of the U.S. District Court for the Eastern District of Texas, made the ruling. The temporary injunction means that the rule will not go into effect until the case is resolved or the injunction is lifted by the judge. The DOL will likely appeal the injunction. Currently there is no timeline for the case to move forward, the NLBMDA said.

"Due to the approaching effective date of the final rule, the court's ability to render a meaningful decision on the merits is in jeopardy," Mazzant wrote. "A preliminary injunction preserves the status quo while the court determines the department's authority to make the final rule as well as the final rule's validity."

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