Overtime Pay Rule Is Overturned: Good News Or Bad News?

December 1, 2016 was supposed to be the day of reckoning for retail labor budgets, but a federal judge’s order has given employers a reprieve. An injunction issued Nov. 22 by Judge Amos L. Mazzant III in the Eastern District of Texas puts on hold a rule that would have required employers to start paying overtime to workers earning salaries of less than $47,476 per year who put in more than 40 hours per week. The current threshold of $23,360 is less than half that amount.

When the Department of Labor announced the overtime increase in May 2016, it was met with howls of outrage by business groups, including the U.S. Chamber of Commerce and the National Retail Federation. Concerns were raised both about the size of the increase as well as the headaches around implementing the change during retailers’ busiest season. Nearly two dozen states and a coalition of business groups went to court to overturn the regulation, and the complaints were consolidated into a single case, according to the Wall Street Journal. There’s no official word yet from the Department of Labor as to what their next move will be.

Now, businesses that spent months preparing for the shift, including Walmart, are looking enviously at companies that procrastinated or failed to act. “The injunction benefited those that didn’t have a plan, or that didn’t know what to do,” said Will Eadie, VP of Sales and Strategy at Workjam. “It’s like the kid who didn’t do his homework being saved by a snow day. And among those companies that were very proactive, which did things such as raising assistant managers’ salaries to $48,000, they can’t roll those raises back, so they will stay the course.”


Other employers reclassified formerly salaried employees into hourly workers. “The huge story line on the retail side is that this rule has had the effect of destroying a career path for people,” one that had previously led through being a salaried assistant manager, said Eadie.

“In retail, hospitality and dining, I meet with executives weekly, a large percentage of whom started as hourly workers,” Eadie added. “There’s the CEO who started as a bagger, the busboy who worked his way up to becoming a regional manager of a restaurant chain. Retail is one of the biggest meritocracies we have.”

Dealing With Uncertainty

With the overtime pay rule stopped in its tracks and the prospect of a generally anti-regulation administration coming into power, retailers and other employers may be breathing big sighs of relief, but their workforce challenges are far from over. “Retailers still need to think about ways to control overtime, because it’s possible this incoming administration could support a huge hourly wage increase,” said Eadie in an interview with Retail TouchPoints. “Increases in the minimum wage are also happening at the state level. Many retail schedules are overly optimized already, so if wage increases go into effect, their labor budgets will go way up.”

Employee morale and retention potentially are even bigger challenges, especially given the lower unemployment numbers the country has seen in recent months. “For a long time there was a mass labor pool, but with unemployment going down that labor pool is smaller,” said Eadie. “Employees have a larger voice than they have had for years.”

So while retailers are happy that the new overtime rule has been blocked (whether the stoppage is temporary or permanent), Eadie’s sense is that “we all collectively want to do better at boosting employee morale, by raising wages or salaries where it’s appropriate. One idea is lifestyle scheduling, with the thought that if it’s a schedule that the employee has chosen, they are less likely to demand overtime pay.”

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