Employers across the nation—including those in Tomball and Magnolia—are adjusting their compensation plans to adhere with new overtime regulations from the 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 DOL. Under the rule, salaried workers who earn $913 or less per week—or $47,476 annually—would be entitled to overtime compensation.

However, businesses, chambers of commerce and state officials have expressed concern about the effects the rule is having on employers and employees. On Nov. 22, a federal judge from Texas sided with business and community leaders, filing an injunction blocking the implementation of the rule.

The injunction is a response to two lawsuits filed against the DOL. The first lawsuit was filed by more than 50 business organizations, including the U.S. Chamber of Commerce, the Greater Tomball Area Chamber of Commerce and the Texas Association
of Business. A second lawsuit was filed by 21 states, including Texas.

“Obviously, we are happy that the judge saw the business side of the case.” TAB President Chris Wallace said. “While we all want higher wages for employees, employers have to be treated fairly to be able to provide the jobs. This is a big win for employers of our state and our country.”

Details regarding the outcome of the injunction were unavailable as of press time, Nov. 23.

Rule overview

The overtime law 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 white-collar exemption originally was meant for highly paid workers who had better benefits, job security and opportunity for advancement,” said Robin Mallett, DOL Wage and Hour Division director of the Houston district office. “Unfortunately the salary threshold had not changed over the years, so it has been eroded by inflation. So the final rule is bringing it back into line with inflation as it is today.”

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

“We believe that the rule is going to put more money into the pockets of middle-class workers or it is going to give them more free time,” she said. “The number of workers who are working more than 40 hours per week continues to increase.”

Provisions in the rule are also intended to prevent the future erosion of overtime protections from subsequent 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 of  affected 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,” she said.

Business effects

As one of the plaintiffs in the lawsuit, members of the GTACC have opposed the law since it was announced earlier this year. GTACC President Bruce Hillegeist said the new law could lead to layoffs as employers figure out how to pay for overtime for previously salaried workers.

“We know that [if] it takes effect, it’ll be detrimental,” he said prior to the law going into effect.  “It’s business taking the brunt of government oversight. Businesses will cut down on employees. It’s more paperwork [and] it’s time consuming to try to make sure that everything is just right according to the government—so we just see it as a tremendous hardship.”

For some employers in Tomball and Magnolia, such as the school districts, the law would not make much difference. Magnolia ISD Director of Communications Denise Meyers said this is because MISD teachers already earn a salary above the new threshold.

“The new law has a really minimal impact for us because the vast majority of our employees are already making above the minimum,” she said.

MISD teachers earn a staring annual salary of at least $49,500; Tomball ISD teachers earn at least $52,000.

However, Leonard Courtright, owner of Allied Siding & Windows in Tomball, said the law would be hurtful to small businesses that would have to make big changes.

“I have a half dozen people that are affected by this, and I only have two options to comply with the law. One is to raise their pay to over $47,000—well, I’m a small business, I can’t afford that—or [I can] put them on hourly and they hate it,” Courtright said. “We are a family business. I pay people to do a job, not to keep their hours. They don’t understand that this is affecting everyone—it’s not just me. And I don’t see a way out of it.” 

Protesting the ruling

To address concerns of businesses statewide, TAB joined with other business organizations in a lawsuit against the DOL. The organization hoped the lawsuits would delay implementation of the rule and stop it from going into effect Dec. 1.

On Sept. 28, the U.S. House of Representatives also passed a resolution—House Resolution 6094—seeking to delay implementation of the rule by six months until the end of March. U.S. Rep. Kevin Brady, R-The Woodlands, said the resolution was passed to delay the rule until the new presidential administration is in place.

“The purpose [of the resolution] is to kick it to the next White House administration and give Congress a chance to block this rule so that it can hopefully be rewritten in a way that doesn’t harm workers and local businesses,” 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 after passage of the resolution, President Obama said he would veto the resolution if it were to be passed by the Senate.

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