SALT LAKE CITY — Business owners and workers in Utah and around the country are in a state of temporary “limbo” following a ruling by a federal judge that has blocked a rule governing overtime pay.
Last week, a judge in Texas suspended the Overtime Rule, which was intended to pay more money — overtime — to middle class workers who work more than 40 hours or give them more free time by capping their work week at 40 hours. The rule was also intended to prevent future erosion of overtime protections, the U.S. Labor Department's website states.
In issuing a temporary injunction, Judge Amos L. Mazzant III of the Eastern District of Texas, ruled that the U.S. Department of Labor overstepped its authority in proposing the new rule. The regulation would raise the salary limit at which workers would automatically qualify for overtime pay from $23,660 to $47,476.
He is expected to issue a final decision on the matter after reviewing the proposal on its merits, but no timetable has been set for when the decision would come down.
Originally scheduled to take effect on Dec. 1, the rule could force some employers to switch salaried employees to hourly wages, cut the hours of hourly employees to avoid overtime pay and reduce benefits or work flexibility for former salary workers.
Critics argue that the rule would hurt businesses and employees by significantly raising costs for employers. However, supporters contend the rule was intended to provide better pay opportunities for millions of underpaid white-collar workers.
Since 2004, salaried workers have been exempt from overtime laws if they earned more than $23,660 a year. Currently, most businesses have the option to hire employees based on salary or hourly pay, but the Labor Department stated that the regulation change would affect 4.2 million workers nationwide, including 36,000 employees in Utah.
Rep. Mia Love, R-Utah, has been on record as saying the new rule was a slap in the face to Utah business owners.
"It will be devastating to many Utah businesses," she said. "It creates a financial burden entangled in government red tape under the guise of helping workers."
For now, business owners will not be required to pay additional overtime to more workers, but the suspension also leaves both employers and employees wondering what lies ahead, said Monica Whalen, Utah president of the Employer’s Council — an organization representing 17 states in the Western region of the U.S. with offices in Utah, Arizona and Colorado.
“This undoubtedly will save employers money, but it will not benefit employees who were looking forward to a little (pay) boost,” she said. “The status quo is remaining.”
Whalen noted that Congress could use this opportunity to “step in” and amend the law, thereby eliminating any question of who has the authority to make the policy change. Time will tell if lawmakers in Washington, D.C., decide to take on the matter, she said.
Meanwhile, a local analyst said the issue could have potentially been avoided had the Labor Department chosen to fashion the rule to take effect incrementally based on economic conditions, rather than making such a drastic increase to the income threshold.
“It seems to me as a matter of efficiency that it would be a sensible thing to do,” said Tom Maloney, professor of economics at the University of Utah. “If they would have said, ‘We’re going to let this move with growth in the broader economy,’ (the Labor Department) could have avoided some of this and been more efficient.”
For the time being, he said, the immediate future regarding the matter is still in doubt.
“It’s an element of a lot of political and economic uncertainty that we face right now,” Maloney said.