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Middle Class Restaurant Workers Won’t Get Automatic Overtime Pay After Federal Ruling

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A Texas court has blocked President Obama’s new regulations

Overtime rule Shutterstock

Here’s a major dose of bad news for underpaid and overworked members of the hospitality industry: A Texas court has blocked President Barack Obama’s new overtime regulations, his most significant policy initiative to raise the wages of salaried middle-class workers like chefs, sommeliers, fast food or grocery store managers, and even food writers.

Judge Amos Mazzant issued an injunction yesterday against the rules that were set to take effect on December 1. The regulations would have made an estimated 4.2 million Americans eligible for time-and-a-half overtime pay.

The Eastern District’s order is temporary but nationwide. More importantly: Mazzant’s ruling strongly suggests he’ll find in favor of the plaintiffs – business groups and a coalition of state attorney generals – and declare the Department of Labor’s new rule to be unlawful because it wrongly uses salaries, as opposed to duties, as a determining factor in whether an employee deserves overtime.

Translation: Salaried restaurant workers who thought they were going to receive extra compensation for long work weeks probably won’t see that extra income this holiday season, or possibly anytime in the immediate future.

Here’s a brief Q&A on the overtime rules and the judge’s ruling:

Why Did Obama Need to Pass New Overtime Rules in the First Place?

Under the Fair Labor Standards Act, hourly employees like line cooks must receive time-and-a-half overtime pay for 40+ hour work weeks. Salaried employees like sous-chefs, by contrast, don’t necessarily enjoy those same protections. Since 2004, salaried individuals earning just over $23,660 – a paltry $11.30 an hour – have been denied overtime pay because their employers apply a so called “duties test” and categorize them – rightly or wrongly – as executive, administrative, or professional workers. Because of these exceptions, fast food companies can promote a line worker to manager, pay her a lower salary instead of an hourly rate, and not have to worry about paying overtime.

The Obama administration knew employers were using the duties test to shaft the middle class. The administration also knew the salary threshold was way too low, not having been adjusted for inflation in over a decade. So after a lengthy rule making period, the Labor Department announced in May that it would nearly double the threshold to $47,500. Workers earning less than that couldn’t be exempted because they were managers. Unlike raising the minimum wage – something Republicans wouldn’t let Obama do once over eight years in office – the overtime regulations did not require an act of Congress.

Why Did Judge Mazzant Block the Overtime Rules?

Because the Department of Labor’s rule unlawfully used salary to subvert an employer’s determination over whether an employee should be exempt from overtime. Or more technically, and in Mazzant’s own words, the department “exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.” The plaintiffs also offered compelling reasons to believe, according to Mazzant, that financial burden of overtime rules could cause “irreparable harm” to state agencies like the Kansas Department of Corrections.

What About Restaurant Workers Who Already Received Raises?

Excellent question. A number of restaurants have surely already raised managerial salaries to over $47,500 so they wouldn’t have to pay those individuals overtime (a policy step that the Department of Labor itself has recommended as a way to comply with the new rule). Those restaurants probably won’t reverse those promotions for a very logical reason: Employers generally have a hard time keeping workers when they cut wages, especially in tight labor markets like this one.

Will the Department of Labor Appeal the Likely Ruling Against Them?

If the Eastern District rules against the Department of Labor (which it surely will), the federal agency will surely seek relief from a higher authority. Just one problem: The case would go to the Fifth Circuit Court of Appeals in Louisiana, which, according to Reuters, has “stymied” the Obama administration before.

Will This Case Go to the Supreme Court?

Possibly. But if there’s a deadlock, a very real possibility given there are only eight justices on the court, the Fifth Circuit Court of Appeals decision – whatever that might be, will likely be upheld.

What If The Rules Emerge Intact From the Courts?

Republicans, who oppose the rules, could still dismantle or water down a number of the provisions next year. President-elect Donald Trump said in August that he’d like to delay the overtime rules or create exemptions for small business.

Obama’s New Overtime Rules Will Give Restaurant Workers Much-Deserved Raises [E]
All Labor Coverage [E]

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