Overtime ruling likely won't force rollback of pay increases

Dive Brief:

The Obama administration’s new overtime rule seemed like a sure thing until a Texas federal judge blocked it — at least temporarily — from becoming law on Dec. 1.
The Post and Courier reports that despite the ruling by U.S. District Judge Amos L. Mazzant III and the quandary it has created, employers plan to continue adjusting to the overtime rule rather than risk noncompliance. Mazzant argued that the overtime rule runs contrary to the Fair Labor Standards Act by basing overtime eligibility on wages rather than job descriptions.
The overtime rule would force employers to double salaries for many workers to keep them above the threshold for eligibility. Wal-Mart raised the pay for entry-level managers above the threshold in September. Post and Courier quotes a Wal-Mart spokesperson as saying that those increases are permanent.

Dive Insight:

Employers who haven’t yet adjusted wages under the overtime rule and are wondering what long-term effects will occur need only look back at the old rule for comparison. The original exempt employees, white-collar workers in administrative and professional jobs, who made more than $23,660 were exempt from overtime. The new rule more than doubles this threshold to $47,476. The rule’s proponents say it’s basically an upgrade to a measure that should have occurred 20 years ago.

Many employers were set to comply with the rule before Judge Mazzant’s decision by paying workers overtime, restricting their hours or raising their wages above the eligibility threshold. Employers are expected to continue with their plans in case the rule becomes law.

Being compliant with the law is preferable to fines and other penalties for noncompliance, even if circumvention is involved, as in the case of employers who raised wages to avoid paying overtime. For employers who might be tempted to undo pay raises following the temporary block, cutting wages after giving raises would seriously erode employee morale and trust.

While awaiting further decisions on the overtime rule, employers should keep workers informed on the outcomes and any changes that might affect them.