u.s. employers have spent months adjusting employee schedules, job duties and pay ahead of a new overtime rule set to take effect next week. but an order from a federal judge on tuesday puts the fate of the rule into question. the preliminary injunction essentially halts the implementation of a rule that would have required employers to start paying overtime to workers earning salaries of less than $47,476 a year, making millions more workers eligible for time-and-a-half pay. employers that made big changes in their workforce ahead of the rule<u+2019>s dec. 1 effective date<u+2014>either by raising managers<u+2019> salaries to the newly set threshold for overtime pay or eliminating job categories like assistant manager<u+2014>say they aren<u+2019>t yet planning to reverse course, while others are taking a wait-and-see approach. the vast expansion of overtime eligibility has been one of president barack obama <u+2019>s signature achievements, intended to meaningfully raise incomes for people in front-line roles in retail, food service and beyond. but the business community objected to some aspects of the rule, and said the new salary threshold is too big a jump from the current $23,660, which was last updated in 2004. nearly two dozen states and a coalition of business groups filed two separate lawsuits to overturn the regulation, alleging that the government had overstepped its authority, including by stipulating that the $47,476 salary threshold would automatically increase every three years. the complaints were consolidated into a single case. on tuesday, judge amos mazzant in texas ruled in favor of the challengers, writing in an order that in setting the automatic salary increases, <u+201c>the department exceeds its delegated authority and ignores congress<u+2019>s intent.<u+201d> the labor department said tuesday that it is considering <u+201c>all of our legal options.<u+201d> <u+201c>we strongly disagree with the decision by the court, which has the effect of delaying a fair day<u+2019>s pay for a long day<u+2019>s work for millions of hardworking americans,<u+201d> the agency said in a statement. the u.s. chamber of commerce, which led one of the suits, said it is pleased with the outcome. <u+201c>if the overtime rule had taken effect, it would have resulted in significant new costs,<u+201d> disrupted work and reduced workplace flexibility, said randy johnson, a senior vice president at the chamber. even without court action, the fate of the rule was far from assured. it could face a strong challenge from president-elect donald trump, who has vowed to roll back business regulations. business owners large and small have shuffled staff and raised pay for some employees<u+2014>changes that may be difficult to walk back. wal-mart stores inc. increased the salaries of its assistant managers and certain other managers to $48,500 from $45,000 recently, ensuring the retailer won<u+2019>t have to pay them time-and-a-half for working more than 40 hours a week. a company spokesman wasn<u+2019>t immediately available for comment. meanwhile, evan kelamis, chief executive of the savoy restaurant in tulsa, okla., had promoted one hourly employee to a salaried management job, giving him a raise of roughly $15,000 to avoid paying overtime under the new rule. had the threshold increase been smaller, <u+201c>we might have been able to put two individuals on a management salary, which would have helped us grow our leadership team,<u+201d> he said. the manager at the roughly 25-employee restaurant will take on early shifts and extra hours to justify the raise. some businesses were still struggling over the rule<u+2019>s finer points this week. kevin rhodes, chief executive of fmi, an allentown, pa.-based contract manufacturer, had been sorting out which of his 81 workers would be affected by the rule, but that<u+2019>s on hold. <u+201c>we are just going to stay put and not make any of those changes until we figure out what the ruling is,<u+201d> mr. rhodes said on tuesday. <u+201c>in this case, waiting to do things until the last minute actually benefited us.<u+201d> fazoli<u+2019>s<u+2019>s chief executive carl howard said his restaurant chain had planned to make its 125 assistant general managers hourly employees, creating a six-figure bonus pool to reward them for keeping overtime costs in check. reached tuesday, he said the company will leave assistant general managers as salaried employees and won<u+2019>t go forward with the bonus pool <u+201c>because it<u+2019>s irrelevant now.<u+201d> accounting firm jlp cpas in recent months moved its nine salaried staff accountants and bookkeepers to hourly pay and hired three part-timers to limit overtime costs when tax season starts jan. 1. for darius burnette, a jlp accountant who normally works a 45-hour week, the new arrangement has brought a fatter paycheck but less flexibility. <u+201c>i like making more money for the same work i was doing,<u+201d> said mr. burnette, whose take-home pay is up about 20%. as an hourly worker, he isn<u+2019>t paid for days<u+2014>or hours<u+2014>he doesn<u+2019>t work. speaking before the judge issued his decision, jlp partner paul pahoresky said he would be reluctant to take any steps that might lower pay or morale should the rule disappear. <u+201c>the challenge is you can<u+2019>t go back,<u+201d> he said. write to melanie trottman at melanie.trottman@wsj.com and ruth simon at ruth.simon@wsj.com
court halts overtime rule, leaving employers in limbo - wsj
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