Employees at some small businesses can still expect changes in their pay or work hours starting Thursday, even though a federal judge has blocked the Labor Department’s overtime rules from going into effect. At other companies, meanwhile, owners have put raises and new schedules on hold as they wait to see how the rules might be reformulated.
The two managers at Jig and Lure Fish Co. will still get the raises co-owners Stephen Fofanoff and Christopher Warnock planned to comply with the rules.
“We think it’s unfair and unethical to propose new compensation to our employees that gives them additional income and then to pull the rug out from under them at the last minute,” says Fofanoff, whose restaurant is located Port Angeles, Washington.
But some owners were still deciding Monday what to do after the court in the Eastern District of Texas issued a preliminary injunction preventing the government from implementing the rules that would have more than doubled the threshold at which salaried employees are exempt from overtime. Under current rules, the threshold is $23,660; it would have risen to $47,476. The court ruled in a lawsuit brought by 21 states.
But at the 35 VERTS Mediterranean Grill restaurants in Texas and Boston, owners have already said 34 managers would get the raises the company committed to, according to spokeswoman Sarah Pendley.
Businesses had given or promised some salaried managers the raises to bring their pay above the threshold rather than have them run up an overtime bill. But at many companies, staffers were being put on hourly pay and their hours limited to prevent overtime costs from soaring. That alternative raised concerns at many companies about the morale issues among employees who felt that they were being demoted.
Many owners are waiting to see whether the Labor Department makes any changes in the rules, or whether it will leave the matter for the Trump administration to decide. During the campaign, Donald Trump told the news website Circa that he hoped small businesses would get an exception from the rules. It’s not known what changes he might make once he takes office.
The Obama administration created the rules to give an estimated 4.2 million workers what it called more fair compensation. Several small business advocacy groups welcomed last week’s ruling, saying the rules had created a financial burden for many small companies.
The Fazoli’s restaurant chain, which had shared information with its 91 franchisees about how it would modify its schedules and compensation, has put its planned changes on hold, CEO Carl Howard says. However, at the company’s Dayton, Ohio, location, which was being used as a test market, staffers’ pay will not be changed, Howard says.
Seventeen employees at Wilkinson Supply in Raleigh, North Carolina, will also see no changes to their new pay and schedules. President Ken Wertz won’t make any adjustments because he expects that some increase in the overtime threshold will eventually be implemented.
“Once you make changes in this direction, they’re hard to undo,” Wertz says.