Employers in the Lake Houston area are adjusting their compensation plans to adhere to overtime regulations from the U.S. Department of Labor that was originally scheduled to go into effect Dec. 1.

The new rule was announced in May and would extend overtime protections to more than 4 million salaried workers who did not already qualify for overtime pay, according to the labor department. Under the rule, salaried workers who earn $913 or less per week—or $47,476 annually—would be entitled to overtime compensation.

However, a federal judge from Texas sided with the concerns of the business community and elected officials by filing an injunction blocking the rule’s implementation Nov. 22.

Judge Amos Mazzant, of the U.S. District Court Eastern District of Texas, was responding to two lawsuits that were filed against the labor department. The first was filed by more than 50 business organizations, including the Lake Houston Area Chamber of Commerce and the Texas Association of Business. The second lawsuit was filed by 21 states, including Texas.

According to the injunction, the court ruled the Department of Labor does not have the statutory authority to apply the rule.

“While we all want higher wages for employees, employers have to be treated fairly to be able to provide the jobs,” Texas Association of Business President Chris Wallace said. “It was one rule for everybody, and that doesn’t work for all industries.”

To have the injunction lifted before Dec. 1, the labor department must appeal to the Fifth Circuit Court of Appeals. The labor department had not announced whether it intends to appeal the injunction as of press time Nov. 23.

Rule overview

The change was requested at the behest of President Barack Obama to address the effect of economic inflation since the rule’s last update in 2004.

Previously, salaried workers who earned less than $455 per week—or $23,660 per year—were entitled to overtime compensation.

“The salary threshold had not changed over the years, so it has been eroded by inflation. The final rule is bringing it back in line with inflation as it is today,” said Robin Mallett, Department of Labor Wage and Hour Division director of the Houston District Office.

The overtime law would provide three options for employers who could be affected by the new threshold. Employers could increase the salary of employees to the new threshold, compensate employees for overtime at 1.5 times the employee’s regular rate of pay, or reduce or eliminate overtime work, Mallett said.

Provisions in the rule are also intended to prevent the future erosion of overtime protections from inflation. Starting in 2020 and every three years after that, the threshold for overtime pay would be adjusted, Mallett said.

She said the rule could improve the quality of life for employees.

“We believe that there will be an improvement in work-life balance because a lot of white-collar employees are working a lot of overtime,” Mallett said. “If people are working less overtime, then their health may improve. [It may] also increase productivity, because  the employee is not working as many hours and they are not as tired, it could improve morale and reduce turnover.”

Protesting the ruling

In addition to the injunction and the two lawsuits that have been filed against the labor department, the U.S. House of Representatives also passed House Resolution 6094 on Sept. 28, seeking to delay implementation of the rule by six months until the end of March.

U.S. Rep. Kevin Brady, R-The Woodlands, whose district includes the portion of Kingwood in Montgomery County, said the resolution was passed to delay the rule until the new presidential administration is in place.

“The rule sounds good on paper but will actually harm workers who are trying to move from hourly positions to salaried management positions so they can grow their career,” Brady said.

The resolution would also have to be passed in the U.S. Senate before going into effect. However, according to a statement issued by the White House, President Obama would veto the resolution if it were to be passed by the Senate.

Lake Houston Area Chamber of Commerce officials said the injunction gave the local business community a voice on the rule.

“This is a good thing for Lake Houston area businesses, said Jenna Armstrong, president and CEO of the Lake Houston Area Chamber of Commerce. “A lot of people have already taken steps [to comply with the regulation]. Regardless, they’re relieved they don’t have to enact it by Dec. 1.”

Obama and the labor department did not comment on next steps regarding the injunction as of press time. 

Business Concerns

The overtime change received heavy opposition from business groups, elected officials and local leaders because of concerns the rule will strain businesses and hinder job creation.

“It needed to be raised—that threshold had not been raised in like 20 years and it was low,” Armstrong said. “But the amount of it—they raised it 100 percent—and to regulate that you have to do it in six months [is a challenge for business owners].”

Locally, the retail, restaurant, nonprofit and hospitality industries could be most affected in the Lake Houston area, Armstrong said.

At Walgreens, some assistant managers will move from salaried positions to hourly positions if the rule is implemented, said Terry Vaughn, a district manager for 14 Walgreens stores in the Lake Houston area.

The move to hourly pay would eliminate certain bonuses and could affect morale for employees who feel like they have received a demotion, said Vaughn who also serves as the public affairs chairman for the Lake Houston Area Chamber of Commerce and has lobbied against the law with local legislators.

“The intent of the law is to give that person a higher wage, but most companies can’t do that or they would have already done it,” Vaughn said. “So what they do instead is take that person back down to hourly, which even if the [company] can protect that rate, it makes the team member feel like they did something wrong.”

For the automotive industry, which has its prices regulated by insurance companies, the additional labor costs could lead to layoffs, said Danny Sullivan, owner of Sullivan’s Advanced Paint and Body in Kingwood.

“Ultimately the consumer pays for this,” Sullivan said. “In a scenario like a doctor’s office, dentist office or even a body shop, insurance companies control what they can and can’t charge, which may cause a situation where fewer people will be hired, or unfortunately even people could be laid off.”