Despite months of planning by businesses, nonprofits and governments to adhere to a new federal overtime wage rule, a federal judge issued an injunction to the pending mandate on Nov. 22.
The Obama administration’s Overtime Final Rule, which the United States Department of Labor planned to implement Dec. 1, would have updated the Fair Labor Standards Act and raised the price ceiling of time-and-a-half overtime pay from $455 per week to $913 per week. On Dec. 1., the USDOL and other defendants filed a notice of appeal in hopes of overturning the Texas-based federal judge’s decision. The regulation would extend coverage to 46,321 Connecticut workers if implemented, according to the USDOL.
In a press release on Nov. 22, Gov. Dannel Malloy expressed disappointment that Obama’s ruling might fail to stand.
“It is my sincere hope that this ruling, which would benefit and expand the middle class, will stand,” he said. “There should be bipartisan support for these protections. Too often, the same voices claiming support for the working class are more than willing to use their power to block meaningful policy changes that help those very workers.”
He said Obama’s overtime plan would boost the economy while strengthening and growing America’s middle class, expanding overtime protection to 4.2 million more Americans.
Megan Fountain ’07, a volunteer organizer for New Haven worker’s activist group Unidad Latina en Acción, said the ruling will not largely impact ULA workers because most of them make less than the amount already stipulated in the current FLSA.
However, she noted that the court’s decision was a “bad one,” and that Obama had made a good effort to adjust overtime rules to the current economic reality.
Mark Soycher, the human resource counsel for the Connecticut Business and Industry Association, said businesses in the organization recognize that the current ceiling remains too low, but that the potential new rule could interrupt existing terms and contracts.
Many businesses thought the rule was “too far, too fast,” Soycher said, since they were notified only six months prior to the rule’s proposed implementation date. Instead, businesses preferred one congressional proposal that would have raised the threshold to the same ceiling as Obama’s rule, but at the later December 2019 date.
To phase in that proposal, the USDOL would have implemented it with two interim steps. An additional bill proposed would instead raise the threshold to $913 a week in December 2020, Soycher said.
Even if businesses preferred alternative plans, before last week, they continued to make preparations for the upcoming rule.
According to Soycher, businesses could prepare for the new rule in multiple ways.
Some planned to increase employees’ wages so their salary would meet the ceiling and overtime could be avoided, he said. Others planned to reduce wages, so by qualifying for the new overtime rule, employees would bring home the same salary as they did before the implementation, he added. And some businesses would just decrease hours so employees would remain under 40 hours a week.
Along with businesses, some nonprofits struggled to adhere to the potential new ceiling, because of lower-than-market wages and many workers clocking more than 40 hours per week.
“When you have nonprofits doing direct service to individuals like home medical care for seniors, it’s difficult to say that I’m at 39 hours and 45 minutes for the week and have to wrap things up,” said Rick Cohen, spokesman for the National Council of Nonprofits. “It’s something no person for a nonprofit wants to do.”
The Great Recession still affects many nonprofits, Cohen said. Adding even more financial hardship in labor costs to meet the ceiling could pose a challenge for the organizations, as all levels of government contract nonprofits’ services for years at a time, which solidifies nonprofits’ budgets early on.
Most nonprofits supported the rule to the council, but also voiced concerns about its implementation within their organizations, Cohen said.
Multiple New Haven businesses interviewed did not prepare for the rule, as they did not believe it would affect their workers.
Local eatery Zoi’s owner Pete Maniatis said because his establishment specializes in breakfast and lunch and is only open around eight hours a day, his eight staff members work only between 35 and 40 hours a week.
“If I was a restaurant, I’d have an issue,” he said.
Maison Mathis general manager Heidi Collins said store employees work in three different shifts, so overtime is rare.
In City Hall, changes were also unnecessary because the vast majority of city employees work under contracts negotiated with the city, which include wage provisions and overtime compensation, city spokesman Laurence Grotheer said. Firefighters’ Local 825 Union President Frank Ricci said city firefighters fall under normal FLSA rules, so they did not expect any additional compensation with the potential new rule either.
With President-elect Donald Trump taking office in January, Obama’s rule might be further jeopardized, Soycher said.
“Even if this rule doesn’t go into effect, it’s something that has helped raise the visibility of the [FLSA],” Cohen said.
But if the law is not updated, Connecticut could implement its own regulations like it has done for minimum wage. Though Connecticut follows the federal requirements for overtime, it has a minimum wage higher than the nation’s floor of $7.25, said Nancy Steffens, the communications director for the Connecticut Department of Labor. On Jan. 1, the state will enact its final legislation to increase the minimum wage from $9.60 an hour to $10.10 an hour.
In the same spirit of upping the minimum wage, Connecticut lawmakers may also increase the state’s overtime price ceiling.
“I think it’s very possible that there will be a proposal in the next legislative session to mimic what was supposed to happen at the federal level,” Soycher said.