Update: New OT rule put on hold amid court battle
Update: New OT rule put on hold amid court battle
23 NOVEMBER 2016 10:00 AM

Federal plans to increase the number of employees eligible for overtime have been stalled amid a successful court challenge in Texas, which has drawn the praise of hotel industry leaders.

REPORT FROM THE U.S.—Hoteliers in the United States, like every other industry in the country, have been working to comply with a new overtime rule put in place by the Obama administration before a 1 December deadline. But the new rule is now on hold after a federal judge sided with a coalition of business groups Tuesday and issued an injunction halting its implementation.

The U.S. Department of Labor had sought to double the salary threshold for mandatory overtime pay to $47,476, but that change was challenged by a group of 21 states and a group of businesses led by the U.S. Chamber of Commerce that claimed the department did not have the authority to make the change, according to multiple media outlets including Reuters and USA Today.

In a 20-page ruling, U.S. District Judge Amos Mazzant claimed the Labor Department’s new salary threshold circumvents the tests for eligibility set out by the Fair Labor Standards Act, with Reuters reporting that he said it “creates essentially a de facto salary-only test” as opposed to the duties tests set out by the established law.

The Wall Street Journal reports Mazzant believed the department overstepped its authority because “the salary level under the Final Rule and the automatic updating mechanism are without statutory authority.”

Even before the ruling, many were questioning the future of the change, given that the incoming administration of President-elect Donald Trump has criticized it in the past and Congressional Republicans have openly opposed it since it was first announced in May.

Despite the uncertainty, experts urged hoteliers to prepare for the change to avoid running afoul of shifting federal regulations.

The change, if implemented, is expected to impact roughly 4.2 million workers by making them eligible for time-and-a-half overtime pay, and that includes many within the hotel industry.

The American Hotel & Lodging Association has been publicly critical of the change, saying it could have a negative impact on both hotels and their employees.

AH&LA officials were quick to laud Mazzant’s ruling this morning.

“A broad-based coalition of employers, including higher education and non-profit organizations joined in this effort to slow down the implementation of this rule that would simply raise the salary threshold too high and too fast. With two-thirds of our industry run by small business owners, we shared those concerns and applaud today’s ruling,” Vanessa Sinders, SVP of government affairs at AH&LA, said in a written statement. “Our industry prides itself on providing employees an opportunity to rise through the ranks and establish life-long careers; however this rule would have strained the ability of small business owners to do right by their team members and ultimately hurt those same employees.”

According to an AH&LA spokesperson, the association “submitted extensive comments for the record to the DOL arguing that the regulation did not consider regional economic disparities and that the proposed increase was too high and too fast and not immediately absorbable for many small businesses.”

This is likely not the final chapter in this saga, the AH&LA noted, with the Department of Labor expected to appeal the decision.

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