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Judge Declares Overtime Ruling Is 'Unlawful' For Now

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On May 18, 2016, the Department of Labor’s final rule updating the overtime regulations was published by President Barack Obama and Secretary of Labor Thomas Perez. The ruling automatically extended overtime pay protections to more than 4 million workers within the first year of implementation.

The ruling was set to go into effect Dec. 1, 2016.

On Nov. 22, Judge Amos Mazzant of the Eastern District of Texas granted a nationwide injunction to prevent the ruling from going into effect. According to Reuters, Mazzant, who was appointed by President Obama, “agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, that the rule is unlawful.”

The Labor Department can appeal the decision to the New Orleans 5th U.S. Circuit Court of Appeals, according to Reuters.

The Tire Industry Association (TIA) was pleased that the implementation of the new regulations has been delayed.

“TIA members across the country have been scrambling to prepare for the onset of this significant change, which would have increased the threshold to be exempt from overtime pay to $47,476,” says Roy Littlefield IV, TIA’s director of government affairs. “Salaried workers who make less than this would have been eligible for overtime pay for hours worked over 40 in a work week.”

Littlefield advises TIA members “to make no changes in current pay plans until there is a final determination.”

Dennis McCarron, executive director of Dealer Strategic Planning Inc. and a monthly contributor to Modern Tire Dealer’s "Business Insight" column, acknowledged the confusion, and believes the rule change will be tweaked rather than struck down permanently.

“It is unfortunate that the U.S. government, specifically the Department of Labor, announced a dramatic rule change earlier this year nearly doubling the minimum earnings of front line managers, and then (Tuesday), the U.S. Courts issued an injunction delaying the rule eight days before the Dec 1 deadline. Such unpredictable behavior is neither good for employees or employers.

"To be as brief as possible: The wage and hour salary guidelines have two existing tests: 1) a duties test and 2) a wages test. The duties test hasn’t changed. If you are salaried, you must make independent decisions on major business decisions like hiring, firing, marketing, scheduling, etc. This is without prior approval of anyone, including owners.

“The salary test is what the rule change was scheduled for. If you passed the duties test, your minimum salary was to increase to $47,476. 

“The injunction simply delays this rule change,” says McCarron. “Interesting it happened after the election, no?

"Most likely, since the injunction is about how the rule changed and what power the government has to set salary minimums, it is most probable that the rule change will go through Congress and get tweaked, not simply struck down."

McCarron's advice? "Sit down with every potentially affected employee, and tell them that changes to their pay plan, as per the government, are on hold and you will let them know what will happen as soon as the government makes their final decision."

He adds that dealers should take this opportunity to make sure their salaried employees have passed the duties test, "because if they don’t pass that test, they are not allowed to be exempt (salaried)."

For information on the overtime rule going forward, check out Bob Ulrich's latest blog: "Why the Overtime Rule Will Not Go Away in 2017."

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