Nov. 23, 2016 | by S.A. Whitehead

A judge in Texas has blocked the Federal overtime regulations that were to take effect next week allowing about 4 million American workers eligible to claim overtime pay.

The rules, set to take effect Dec. 1, are the result of an initiative begun two years ago by the Obama Administration to modernize overtime protection. The U.S. Department of Labor's new rules would have required businesses to pay time-and-a-half to employees who worked more than 40 hours a week and earned less than $47,476 a year, which is about two times the current salary minimum that allows an employee to remain exempt from overtime pay. 

U.S. District Judge Amos Mazzant III in the Eastern District of Texas, however, ruled  Tuesday in favor of plaintiffs, representing Nevada and 20 other states, who filed an emergency motion for a preliminary injunction of the law, essentially stopping the changes from taking place next Thursday. The states involved in the court action claimed that the new rules would have vastly increased government expenditures in their jurisdictions and required millions of dollars of additional pay by businesses in those 21 states.

The news did not sit well with the Labor Department, which issued this statement in response to the federal court action:

"We strongly disagree with the decision by the court, which has the effect of delaying a fair day's pay for a long day's work for millions of hardworking Americans. The department's overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options."

Conversely, responses from restaurant chains and retailers was ebullient with the National Council of Chain Restaurants' Executive Director Rob Green lauding the court action on regulations, which the organization labeled "misguided." 

"Today, Judge Mazzant agreed with what NCCR and our coalition allies have been saying all along: That the Labor Department's ill-conceived overtime regulation is a dramatic government overreach causing significant harm to small businesses and their employees around the country," Green said. "The regulatory 'timeout' imposed by Judge Mazzant should allow Congress to vote to stop the regulation once and for all and would also let the incoming Trump administration create a more realistic and workable overtime solution based on sound economic considerations."

The National Retail Federation — one of the parties in the injunction request — went a step further, calling the new regulations "unlawful" and claiming that Tuesday's court action would effectively pause the action from taking place until "the courts reach a final decision on their legality."

"The Labor Department's overtime changes are a reckless and aggressive overreach of executive power, and retailers are pleased with the judge's decision," said NRF Senior Vice President for Government Relations David French, in a news release. "The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect. We hope the judge ultimately finds in our favor, and in the meantime this timeout gives Congress a chance to take another look at the impact of these rules."

Before Tuesday's decision, many restaurants had been laying the groundwork to implement the new overtime rules, however. Snagajob reported that 28 percent of the employers they polled had planned to give their workers a small raise, so they no longer qualified for the overtime pay threshold, while 22 percent planned to decrease worker hours to no more than 40 per week to avoid overtime pay. Another 13 percent planned to decrease base salaries to offset any overtime pay they could potentially make.

Mooyah Burgers & Fries COO Michael Mabry believed the new regulations had merit but didn't think the complexity of the restaurant industry was taken fully into consideration.

"One of the benefits of getting into the restaurant industry at a young age is the opportunity to advance and create a career," he said. "We have a lot of entry level management opportunities and we are providing a pathway to a career for many young people who are sometimes coming right out of high school or college. I think there could have been more of a stair-step approach here, or a more industry- and city-specific plan that could have accounted for the differences in our industry, and the difference in the cost of living for the various cities we serve."

Toppers Pizza Chief Financial Officer Kendall Richmond said he wasn't surprised about Tuesday's decision, especially with the recent election of Donald Trump.

"Part of Trump's agenda that he released recently said that he'd review all Executive Orders in his first 100 days in office," Richmond said. "So, things could move very quickly. Trump has met with Anthony Puzder, CEO of CKE Restaurants, as potential Secretary of Labor. He understands the impact this has on the restaurant industry, and business as a whole. So, if he joins the Cabinet, I imagine this will be rolled back quickly."

Indeed yesterday, news of just that possibility published across various media concerns, reflecting an overall sentiment that the possibility of having someone like Puzder high up in the government hierarchy of the new administration might be just the thing to give the business viewpoint of restaurateurs better representation and voice in the coming administration, perhaps much to the chagrin of the voice of labor, which had appeared to be gaining ground under the Obama Administration. 

It's part of what also appears to be a coming change in the tide in Washington from the current administration's willingness to give voice to the needs and desires of American workers, versus the incoming administration's apparent readiness to give greater voice to the concerns of businesses. The likelihood of that transition in viewpoint is well encapsulated in a response from Kendall Richmond at Toppers to the question of whether he saw any merit at all in the now-on-hold overtime regulation changes. 

"No," he said bluntly. "The government has to get out of the regulation business. You can't regulate businesses to profitability. This overtime regulation is really blowing up the model we had in place that was successful for our franchisees, and gave real opportunity to entry-level team members who were dedicated and hard working. 

"Those people who come into our system and want to be a go-getter and want to do more, and show more, can't under this regulation. I have staff who work flexible hours now, but we have to take that away because of the regulation. I don't think it would have been as bad if they didn't make the regulation so much so quickly. This could have been a slower, more measured roll out, with more specific considerations paid to the differences in industries and geographic locations."

 


Topics: Business Strategy and Profitability, Financial News, Legal Issues


S.A. Whitehead / Award-winning veteran print and broadcast journalist, Shelly Whitehead, has spent most of the last 30 years reporting for TV and newspapers, including the former Kentucky and Cincinnati Post and a number of network news affiliates nationally. She brings her cumulative experience as a multimedia storyteller and video producer to the web-based pages of Pizzamarketplace.com and QSRweb.com after a lifelong “love affair” with reporting the stories behind the businesses that make our world go ‘round. Ms. Whitehead is driven to find and share news of the many professional passions people take to work with them every day in the pizza and quick-service restaurant industry. She is particularly interested in the growing role of sustainable agriculture and nutrition in food service worldwide and is always ready to move on great story ideas and news tips.

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