A judge’s decision to overturn an overtime rule that would have eligible more workers for extra pay has largely been well received by small business owners.
A federal judge in Texas rejected a new Biden administration rule on November 15 that would have allowed millions more salaried workers nationwide to receive overtime pay. After 40 hours per week, almost all hourly workers in the United States are eligible for overtime compensation. However, unless they make less than a specific amount, many salaried employees are exempt from that requirement.
The now-cancelled rule would have been the largest raise in that cap in many years. Employees in certain managerial, administrative, and professional professions who earn $43,888 year—which would have increased to $58,656 annually as of January 1—were required to receive overtime pay from their employers as of July 1. However, the prior threshold of $35,568—established in 2019 during the Trump administration—is again back in force.
The judge ruled that when assessing eligibility, the agency could not give employee pay precedence over job responsibilities.
Since none of his current employees would have been impacted, Guillaume Drew, founder of Or & Zon, a New York-based firm that employs 12 people and sells sustainable home items online, said that repealing the rule helps him keep labor expenses and product prices down, especially for future employees. However, he asserted that it is still crucial that workers receive just compensation for their labor and time. He will likely give workers incentives like spa days and the ability to work from home instead of overtime compensation now that the decision has been overturned.
According to him, businesses must strike a balance between being profitable and showing concern for their workers.
Epoxy Werx, a San Diego-based company with 12 workers that specializes in epoxy flooring, is owned by Sheldon Sutherland, who claimed the decision is good for his business.
Managing labor costs is crucial for small businesses, and the proposed change would have resulted in a large increase in expenses, he said. Because of the decision, we are able to keep our current pay structures in place and continue to provide competitive compensation while maintaining financial stability.
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The policy was praised by small business associations as well.
According to John Arensmeyer, founder and CEO of Small Business Majority, the Department of Labor attempted to do too much too quickly, causing sticker shock for small firms who are still recuperating from the pandemic, even if preventing any increase to the threshold ignores inflation. Increases need to be more measurable and consistent.
The decision will benefit struggling small company owners, said Karen Kerrigan, president and CEO of the Small company & Entrepreneurship Council.
According to her, it will enable companies to match their pay strategy with the demands and adaptability of each worker and the market. The court’s decision benefits small business owners and their employees.
However, not everyone agreed that the change was beneficial for small enterprises. Fair compensation, including overtime, boosts morale and increases production, according to Stephanie Penn, owner of Tee & Honey, an online t-shirt store located in Southfield, Michigan. The July 1 verdict had an impact on two of her employees, and if the higher cap had taken effect on January 1, it would have had an impact on one as well.
According to her, having more precise rules about overtime compensation also helps businesses prevent any disagreements or miscommunications over compensation. By overturning the rule, it puts more of a burden on companies like mine that work hard to treat their workers fairly while simultaneously creating opportunities for unfair practices that could lower morale and retention.
— The Associated Press’s Mae Anderson
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