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Federal judge halts new overtime rule before December 1 activation

JACKSON, MISS– A federal judge has blocked new overtime regulations from taking effect on December 1. 

Judge Amos Mazant in Texas ruled in favor of the 21 states–including Mississippi–who had filed complaints against the new regulations.

On May 18, 2016, President Barack Obama and United States Secretary of Labor Thomas Perez announced the update of the Department of Labor’s overtime regulations. The new rule will extend overtime for over 4 million workers within a year of the December 1 start date.

Upon the new rule’s passing, Senator Roger Wicker (R-Miss) expressed that he wasn’t so sure the regulation was beneficial.

One of the new laws extends overtime pay requirements to entry-level salaried workers.

“The additional labor costs might force these organizations to provide fewer services or raise prices,” said a statement from Wicker’s office. “Young people with their first full-time job could be reclassified as hourly workers, limiting opportunities for promotions.  Some economic analysts doubt that employees will actually see their take-home pay increase.”

Senator Thad Cochran, Chairman of the Appropriations Committee, also expressed concern before the new rules were announced in May.

“The overtime exemption rule is an example of the administration trying to rush new regulations before its term expires.  It is troubling that such a significant rule change is being finalized despite widespread concerns about the effect this rule could have on businesses and organizations in rural states like Mississippi,” Cochran said.

This new regulation under the Fair Labor Standards Act would:

  1. Set the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
  2. Set the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  3. Establish a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

“There are certain industries that are paying someone so much, that if you calculate the hours someone is actually working they wouldn’t be getting paid even minimum wage,” said Joel Jasper with Morgan White in Jackson.

Jasper said that the new law got “the genie out of the bottle” on this problem. However, he said the minimum being changed to an income of $47,476 is possibly too far of a jump.

“Some of the employers I’ve talked to have said we probably need to raise the minimum threshold, but $47.5 is a big jump from $23.4,” said Jasper.

He agrees that Congress will most likely settle on a number somewhere in the $30k range but that no action will be taken before President Trump is inaugurated.

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