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Overtime pay rules: What now?

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A federal judge has temporarily delayed enactment of the Obama administration’s new overtime pay rules, leaving restaurants and other employers in a state of limbo.

The new rules are set to take effect on Thursday, Dec. 1, a date that some business groups say will almost certainly pass without a start of enforcement. Others, including the National Restaurant Association, note the stay on enactment could be lifted at any time. Arguments for a summary judgment on the new rules—a permanent decision—are scheduled to begin today, leaving open the possibility of a reinstatement within days.

“The court’s preliminary injunction opinion sends very strong signals that the court will ultimately grant the permanent injunction, but that’s not a given," commented Ryan Glasgow, a partner and labor specialist in the law firm of Hunton & Williams.

The NRA is advising members to be prudent and adjust to the new rules as if a stay had not been granted. The same recommendation was made by NACS, the association for convenience stores. Meanwhile, the NRA continues to lobby Congress for a legislative delay.

Some opponents of the new Department of Labor rules say the reasons for the temporary injunction from the federal Eastern Texas District Court bode well for a permanent stay of enactment. Judge Amos Mazzant ruled that the DOL had overstepped its authority by setting a new income level as the test of whether a salaried employee was entitled to overtime pay if he or she worked more than 40 hours per week. An exemption should be based in part on the sort of duties the salaried employee performs, as per Congress’ original intent in passing the Fair Labor Standards Act decades ago, Mazzant said. Persons in white-collar managerial jobs were intended to be exempt, he contended.

The decision raised speculation that the DOL may have to amend its rules to include that so-called duties test.

Such a revision might not help restaurant employers dodge an increase in overtime pay. Restaurant managers are often called upon to assume the routine duties of hourly employees, from bussing tables to grilling burgers, during crunch periods or when the restaurant is shorthanded. Restaurateurs have been routinely sued by managers who say they are entitled to overtime because they perform the exact same duties as nonexempt employees. 

But a revision of the rules could provide enough time for Donald Trump to overthrow the new regulations. The president-elect has vowed to overturn every “overreaching” executive order that was issued by President Obama. The DOL drafted the new pay guidelines after Obama issued an executive order mandating the rules be updated.

“It’s safe to say that the trial court and appeals litigation will drag out at least until January 20, 2017, when President-elect Trump takes office,” said Hunton & Williams’ Glasgow. “That means that Mr. Trump and his hand-picked Secretary of Labor will have a lot to say about whether the DOL will continue to pursue the rule in one form or another.”

Under changes set by the DOL earlier this year, restaurateurs and other employers would be required by the new rules to pay salaried employees at one and a half times their pay rate if their annual income falls below $47,476. The current threshold is less than half that level, or $23,660.

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