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Millions of workers in limbo after rule expanding overtime pay eligibility is put on hold

A Labor Department rule that would have kicked in Dec. 1 was supposed to make more than 4 million additional workers eligible for overtime pay. (iStock photo)

As an education specialist for a museum in Kansas City, Mo., Cherie Kelly says it can be tough to keep her work schedule to 40 hours a week.

On weeks with evening events or special programming, she might have to put in closer to 60 hours, which she says happens about once a month. She was looking forward to earning some extra money through overtime pay soon, thanks to a federal rule that was slated to kick in this week.

But she and many other workers are now in limbo after a federal judge in Texas ruled last week to halt an overtime rule that was supposed to take effect Dec. 1. The Labor Department rule, which would have made overtime pay available to more than 4 million additional workers, was challenged in court by business groups and some states. The judge ruled that the department exceeded its authority when it more than doubled the salary limit that determines which workers should be made eligible for overtime pay.

“Now with the regulation on hold, their better paychecks and better work life balances are on hold, as well,” said Judy Conti, federal advocacy coordinator for the National Employment Law Project, a nonprofit organization that advocates for workers.

Judge halts federal rule that would have expanded overtime pay to millions of workers

The rule would have made overtime pay an option for full-time, salaried employees earning up to $47,476 a year — substantially more than the current threshold of $23,660 a year. The rule hadn’t been updated in 12 years. But business groups, states and other employers expressed concerns that the higher income threshold would hurt their bottom lines, disrupt their business models, or limit opportunities for employees.

“We were worried about the impact the rule could have had on careers and employee flexibility,” said David French, senior vice president of government relations for the National Retail Federation, one of the plaintiffs that sued to stop the rule. “Millions of workers would have been turned into time-card punchers.” French said he understands there should be “periodic updates” to the overtime rule, but said that the size of the increase to income threshold and the timing of the rule surprised some businesses.

As expected, the Labor Department appealed the injunction on Thursday. But it’s not yet clear when the court will come to a final decision on the case.

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Some consumer groups said they are worried that the rule advocated by President Obama may not survive under the next administration. The Labor Department under President-elect Donald Trump could decide to drop the case, putting an end to the rule, said Ross Eisenbrey, vice president for the Economic Policy Institute, a left-leaning think tank.

As a result, Eisenbrey said, the institute is researching options for becoming a party in the lawsuit so that it could continue the case even if the Labor Department drops out. “That shouldn’t be the end of the matter,” he said.

The last-minute delay of the rule, which was halted less than two weeks before it was supposed to go into effect, created confusion for some employers that have spent the past several months preparing for the regulation. Some companies offered raises to managers so that their salaries would be above the proposed threshold. Other workers were set to become eligible to be paid time-and-a-half on any time worked beyond 40 hours a week.

However, the adjustments didn’t always involve bigger paychecks. Some workers were moved from salaried jobs to hourly roles, meaning they would have to clock in and out. Other employees were set to start working fewer hours.

Many employers said after the ruling that they would move ahead with changes even though the future of the rule is murky. TJX, the parent company for T.J. Maxx and Marshalls, said this week that it would “move forward as planned” on the new rule, without elaborating on what those changes would be. Walmart in September raised the salaries of its entry-level managers to $48,500 from $45,000 to bring them above the threshold for overtime pay and said this week it has no plans to change course.

Andrew Bankston, a postdoc in the department of neurological surgery at the University of Louisville, received an email last week from the university saying that it would move ahead with raises announced earlier in the year to put some postdocs above the income threshold proposed by the Labor Department.

With a 1-year-old daughter at home and his wife changing careers, Bankston said the nearly $10,000 raise he’ll receive will help his family build savings. “We were kind of counting on that increase, so when the potential came up that it could even go away before we ever had it, it was a little bit worrisome,” said Bankston, 31. “It will give us a lot more security for sure.”

Other employers are taking a wait-and-see approach until they learn more about whether the rule will survive, leaving some workers unsure of what will come next.

Sarah Gzemski, 25, a publicist in Tucson, Ariz., was switched to an hourly role from a salaried one with the same annual pay and benefit on the day before the rule was put on hold. Gzemski, who said her employer has always compensated her whenever she’s had to work overtime, will continue to log in her hours for now. But she said it’s not clear whether the shift will be permanent.

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