Business owners had a bittersweet victory Nov. 22 when a federal court placed a preliminary injunction on the Department of Labor’s new overtime rule, called the Final Rule, which would have gone into effect Dec. 1.
“There’s a sigh of relief, certainly; a stay of execution,” said Tray Abney, director of government relations for The Chamber, Reno-Sparks-Northern Nevada. “The down side is that a lot of businesses already spent time and money in an effort to get ready.”
The overtime rule, announced May 23, would have more than doubled the minimum amount an employee must earn to be exempt from overtime from $23,660 per year to $47,476, and required more stringent tracking of hours worked.
Abney said most business owners and organizations were in favor of looking at the overtime exemption and minimum salary because it had not been adjusted for many years.
However, the Final Rule created major hardships for businesses, he said, because it immediately doubled the minimum rather than gradually increasing it and future increases were made automatic without congressional oversight.
Business owners have spent the last six months scrambling to make changes.
The court decision “is one of those good news, bad news stories,” Bruce Gescheider, owner of Moana Nursery, told the NNBW. “We’ve done all the work. It’s a classic example of putting small business through the ringer then, at the last second, after all the work is done, changing the rules again.”
Gescheider supports the court decision, in part, because of the impact the Final Rule would have had on young managers in the business who would have had to clock in and out, and drop what they’re doing to take breaks. Such clock-watching and extra oversight would erode the family atmosphere of the small business.
However, like many businesses, Moana has already implemented raises and changed the status of some employees from salary to hourly to conform to the DOL rule.
“It’s way too late to make any changes except we won’t make our employees clock in and clock out,” he said.
David J. Frohnen, owner of Silver State Analytical Labs, also put a lot of time, money and effort to get ready for implementation of the rule.
“Silver State Analytical Labs was prepared to comply with the new rules by adding time clocks, adding a part-time payroll clerk, reviewing time clocks, instituting new rules on flexible work schedules, and by adjusting the pay rates and duties of approximately 50 percent of our team members,” Frohnen told the NNBW in an email exchange.
“We were also prepared to reduce or eliminate our profit-sharing programs and incentive compensation plans, as well as other benefits, in order to control our costs and remain viable in a very competitive market.”
Those changes had not yet been implemented and will not be until it becomes necessary, he said.
“We sincerely believed that the DOL rules were excessive and unconstitutional,” Frohnen said. “The rules were contrary to the intent of congress in the original (Fair Labor Standards Act) and did not reflect the true nature of the modern work place or the competitive marketplace. Not to mention the total failure and over-ride of the historic ‘duties test’ for time-and-half overtime pay.”
In September, the National Federation of Independent Businesses (NFIB). and other business organizations filed a suit in the U.S. District Court for the Eastern District of Texas. It was followed in October by a petition to the same court from a coalition of 21 state attorneys general, lead by Nevada AG Adam Laxalt and Texas AG Ken Paxton, to block implementation of the rule.
“Federal agencies cannot unilaterally reinterpret federal law to impose burdens on state governments and businesses, and today’s preliminary injunction reinforces the importance of the rule of law and constitutional government,” Laxalt said in a press release following the announcement of the court injunction.
The temporary injunction was issued Nov. 22 but the court has not yet ruled on the legality of the Final Rule.
“It is important to note that Judge (Amos L.) Mazzant’s ruling has not invalidated the Final Rule; it has simply placed its implementation and enforcement ‘on hold’ at this time,” Dora Lane, partner with Holland & Hart specializing in labor and employment law, said in an email to the NNBW. …
“Business owners should, however, diligently follow the case development because it is difficult to tell how much time might be allowed to commence compliance, in the event the Final Rule is ultimately determined to have been properly promulgated.”
Whatever the court does or doesn’t do, The Chamber’s Abney anticipates changes When President-elect Donald Trump is sworn into office Jan. 20.
“My guess is that (Trump) and the new Congress will look differently on it,” Abney said.
Following the injunction, Frohnen said he is grateful that the company will not need to implement wasteful practices to comply with the Final Rule and that he can continue to offer his employees the benefits they’ve been receiving.
“Going forward, we are grateful that we can continue to … Operate with a teamwork and client-service culture — where all team members are treated as professionals,” Frohnen said. “And continue to operate in a manner where flexibility for workers and customized service to clients and the public is allowed.”
