Judge Halts Dec. 1 Start Of Overtime/Salary Rule
As of Tuesday, Nov. 22, a Federal Department of Labor rule governing overtime exemptions has been placed on hold. It was scheduled to take effect on Thursday, Dec. 1, and would have nearly doubled the salary level at which employers are required to pay overtime to managerial employees. The previous level was $23,660 and the new level will be $47,471, if the rule is allowed to go into effect.
The rule has already created a number of problems in Marinette County and all across the nation. Among government employees impacted locally are 23 Marinette County employees, mostly in the Department of Health and Human Services, newly hired Veterans' Service Officer Tom Doyle, and City of Peshtigo Parks and Recreation Officer David Zahn.
In response to the new rule the City of Peshtigo opted to end Zahn's salaried status and set his pay at $18 per hour, effective Dec. 1. With an additional 206 hours of overtime pay a year that wage rate would have equaled his former salary of $43,000, according to Peshtigo Alderman Tom Gryzwa.
Marinette County Personnel Committee addressed the issue at meetings in October and again on Thursday, Nov. 10 , but took issue for the 16 Marinette County employees affected was loss of the extra week of vacation pay they would lose each year if they became hourly employees, along with the need to keep detailed records of their often irregular hours. The vacation pay had been given to salaried employees in lieu of overtime pay. County Administrator Shawn Henessee predicted there might be a change in the rule before its scheduled Dec. 1 implementation date, after which the committee decided to again take no action.
The ruling by Judge Amos Mazzant, a federal judge in the U.S. District Court for the Eastern District of Texas came in response to an emergency motion for preliminary injunction that had been filed by Wisconsin and 20 other states in October . The case filed by the states was combined with a similar suit filed by the U.S. Chamber of Commerce and other business groups.
The judge said his order will hold until further court review. He accepted the argument that to allow the rule to go into effect would create harm to employers.
The Labor Department is expected to seek an immediate review, but until another court issues a contrary order, the Dec. 1 implementation is on hold nationwide.
In June, Wisconsin Senator Ron Johnson and Sen. Lamar Alexander, Tennessee, led 44 senators in introducing legislation under the Congressional Review Act to block implementation of the overtime rule.
"I applaud the decision by a U.S. District Court to issue a preliminary injunction halting the implementation of the Department of labor's overtime rule," Johnson declared after the injunction was ordered. "The court took a sensible approach and acknowledged the need for additional time to consider the pending case. I recently wrote to labor Secretary Perez as well as heads of other agencies, asking them to cease implementation of costly rules such as this in order to avoid piling compliance costs on consumers and businesses. In light of the fact that the incoming administration and Congress are likely to rexamine and unwind many of these regulations - such as the Department of Labor's fiduciary' rule, the EPA's "Clean Power Plan,' redefinition of the waters of the United States and the FDA's "e-cigs' rule - I urged these agencies to recognize they can and should avoid placing additional regulatory burdens on the American people."
In September Wisconsin Attorney General Brad Schimel joined a bipartisan coalition of 21 states asking the court to prevent implementation of the rule on Dec. 1.
"I'm incredibly happy the court agreed the rule should be put on hold," Schimel said in announcing the preliminary injunction. "There's no greater honor than representing millions of Wisconsinites in the continuous fight for the return of power to our citizens, away from an out-of-control federal bureaucracy in Washington D.C. Wisconsin must have the ability to set its own priorities and policies."
In addition to raising the salary-level threshold to $47,476 for employees to be exempt from overtime, regardless of whether they perform executive, administrative, or professional duties, the new rule included a "ratcheting mechanism" that would automatically increase the salary-level threshold every three years without going through the standard rule-making process required by federal law.
Judge Mezzant ruled that Congress intended to create an exemption from the overtime rule in the Wage and Hour laws for employees who were in the executive, administrative and professional categories. By increasing the salary threshold to $47,476 annually, a doubling of the previous threshold, the Department of Labor effectively created a "salary test" that consumed the definition of exempt employees. This action, said Mezzant, exceeded the Department's authority.
His injunction agreed with the states' arguments that the significant cost of complying with the final rule would cause increased costs that would likely impact governmental programs and services, and that compliance would cause irreparable injury.
His ruling also concluded that because the final rule is unlawful, the Labor Department also lacks the authority to implement the automatic updating mechanism, "Thus there is no need ot address the State Plaintiffs' other arguments."
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