Judge Blocks Overtime Rule; Retailers Cheer Decision
A federal judge on Tuesday blocked an Obama administration rule to extend mandatory overtime pay to more than 4 million salaried workers from taking effect, imperiling one of the outgoing president's signature achievements for boosting wages. U.S. District Judge Amos Mazzant, in Sherman, Texas, agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, that the rule is unlawful and granted their motion for a nationwide injunction. The rule, issued by the Labor Department, was to take effect Dec. 1 and would have doubled to $47,500 the maximum salary a worker can earn and still be eligible for mandatory overtime pay. The new threshold would have been the first significant change in four decades.
Total Retail's Take: This law would have had a drastic impact on the retail industry, particularly for those retailers with a significant number of brick-and-mortar stores, many of which employ store managers whose salaries are below the $47,500 threshold. Consider Wal-Mart, which in preparation for the new overtime law going into effect, raised salaries for entry-level managers from $47,476 to $48,500 annually. Wal-Mart, and many other retailers, were seeking to protect themselves from unpredictable additional costs for salaried employees. Retail industry groups, including the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) aggressively lobbied against the passage of the new law, and naturally were happy with Judge Mazzant's ruling.
“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 Vice President for Government Relations David French said in a company press release. “The rules are just plain bad public policy, and we're 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.”
I think the right decision was made here. While the law was created with good intentions — workers making less than $47,500 a year that felt they were being exploited by their employers with longer-than-normally-scheduled workdays would be compensated for their extra work — it very likely was going to come at the expense of middle-manager jobs. Many retailers said they would be unable to afford the $47,500 threshold, thus limiting the hiring they did for those positions. Furthermore, many hourly workers figured less likely to be promoted to a salaried manager position.
While the law isn't dead yet — the Labor Department is evaluating its options and could choose to appeal the decision — President-Elect Donald Trump has already voiced his opposition to the law. Congress could choose to pass legislation that would upend the law or the Labor Department could drop the appeal when Trump takes office.
