Federal Judge Blocks Overtime Rule

Filed in Codes and Standards, Legal by on November 23, 2016

gavelmoneyhouseIn a victory for NAHB, a federal judge in Texas on Nov. 22 granted a preliminary injunction to delay implementation of the Department of Labor’s new overtime rule. The rule, which was scheduled to take effect Dec. 1, would double the minimum salary limit from $23,660 to $47,476.

NAHB joined other business groups in filing a legal challenge to the overtime rule on Sept. 20. The lawsuit was filed in the U.S. District Court for the Eastern District of Texas. In addition, 21 states have also filed suit challenging the rule and the two lawsuits have been consolidated. The parties have filed motions for a summary judgment.

While the injunction is only temporary, the ruling by Judge Amos Mazzant sent a strong signal that he could likely side with NAHB and our business coalition.

“The State Plaintiffs have shown a likelihood of success on the merits because the Final Rule exceeds the Department’s authority,” Mazzant wrote in his opinion.

Working with House and Senate lawmakers and members of our business coalition, the Partnership to Protect Workplace Opportunity, NAHB has been leading the effort to mitigate the effects of the overtime rule. In addition to the lawsuit, the association is asking Congress to phase-in the new salary requirements, as well as provide permanent relief from the rule’s provision to automatically update the salary threshold every three years.

As NAHB keeps working toward permanent relief, the association will continue to provide members with the tools they need to comply with the new overtime requirements in the event that the court rules against NAHB, our business coalition and the 21 state attorneys general.

For more information, contact Felicia Watson at 800-368-5242 x8229 or  Suzanne Beall at x8407.

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Comments (35)

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  1. Thank you for this update, best Xmas gift small businesses could have gotten this year. Hopefully Trump will throw this out along with all of the other labor department regulations that are costing our American small businesses billions of dollars in regulatory and lost productivity a year.

    • lupe curiel says:

      Like if this went through, all you would is pass it along to your customers. This really doesn’t business a whole lot more, when was the last time you tried to live on minimum wage.

      • Darius Grimes says:

        There is no proof DJT is not paying his taxes, period. But what most opponents of delaying this rule do not understand is it affects every business in the country, not just construction. The other thing those of you painting this as not that big deal are forgetting is there is a huge administrative costs because you have to put every person on a time clock and keep records and report to bureaucrats.. The regulatory burden is a real problem.

        This has nothing to do with min wage, if you think it does you are misinformed.

  2. Martin Knezovich says:

    Specifically, what are the other labor department regulations that you think should get thrown out? What were the reasons for those regulations in the first place, and why are those reasons invalid? It’s getting hard enough as it is to attract young laborers into this industry, are you sure you want to send the message that you want to pay them even less?

    • Darius Grimes says:

      Other regulation have nothing to do with pay but a lot to do with reclassifying subcontractors as employees or builders/developers being classified as joint employers. Labor has dozens of new labor reclassification mostly from the FLSA, ACA, FMLA, etc that reclassify subs, franchise employees, temoray labor, leased employees, etc as direct employees and result in thousands or hundreds of thousands in fines. Check UBER vs State of California, FED EX vs the US Government, and many others. The move on businesses, both small and large, is to increase payroll taxes and fines and is resulting in a Yuge mountain of regulatory paperwork and legal fees. Good for trail lawyers does nothing for wages, in fact it stifles hiring and job creation. Regulations cost US business around 1 trillion a year, A lot of this money could be used for job creation and voluntary wage increases but instead it is be diverted to produce more jobs for bureaucrats and paper pushers, it does not increase wages, jobs, or productivity. Yes, some regulation are necessary but the last 8 years of over 100,000 pages of new regulations have been an outright assault.

      • Martin Knezovich says:

        Being this is a Home Builder blog, I won’t comment on Uber, other than to say I think it takes more training and skill to do just about any phase of construction than driving a car. Employee vs. subcontractor status regulations have been in existence for as long as I can remember, so nothing new there. I would argue that the regulations surrounding that topic do not add to construction costs, but define who is responsible for those costs, which are inherit of an industry that is in itself risky, both physically and financially. Reclassifying a worker from employee to sub-contractor merely shifts the costs of insurance and liability from the general contractor to the worker. Imagine your 20 y.o. child or grandchild having the expertise to consider those factors when taking on that first roofing job. As an employer, your employees are your means to job quality and dependability. Also, your competition is required to follow the same rules, so be cautious of degrading regulation, it’s there for your protection also.

        • Darius Grimes says:

          I am not talking about long standing regulations for the purpose job-site safety like OSHA, WC or IRS definitions for the purpose of payroll taxes, those have not changed. Maybe real world examples will help you better understand the changes you are obviously unaware of.

          Example 1: An employer has 40 employees and leases 10 in order to avoid compliance with the ACA. After 6 months they fire one of the leased employees for missing too much work and non-performance. He’s leased so by IRS rulings he is employed by the leasing company and payroll taxes are included in your leasing costs, so no problem there.

          Example 2: You have a really good framer or any other subcontractor that likes working with you and has his own small business, licenses and insurance. You keep them very busy so unbeknownst to you they perform more than 50% of their work for you or you become their sole source of revenue. The subs work from plans provided by you and you are responsible for supervising their work as the contractor.

          In the Example 1. Leased Employee: If they work for you more than 90 days they are now being reclassified as an employee and you as a joint employer. They are entitled to the same benefits as your regular employees including, vacation, sick days, health insurance, pensions, etc. You did not offer them time off and protection of their position via the FMLA because you didn’t ask and they didn’t tell you they were having personal issues at home that could be responsible for their tardiness and work perfomance. Result you failed to offer them the FMLA and you get fined thousands or maybe 10’s of thousands for non compliance for discrimination under the FMLA, FLSA and ACA. Not only for that leased employee but hte other 9 you are also discriminating against

          In the second case the subcontractor has a sick wife, or child and you provide health care to your regular employees but obviously not to your subs. Under the FMLA, FLSA, and ACA if they derive more 50% of their income and plans direct the work to be performed along with your supervision. You are now reclassified as the employer and or joint employer and subject to paying their medical bills, and well as fines for discrimination etc.

          You are obviously unaware of the dozens of reclassification from the 28 different Labor Department Heads being implemented by 1000’s of Presidential Memorandum (has same affect as Exec Order but not published like Exec Orders). The IRS, OSHA and WC are the least of your worries in comparison. What is happening is there are now about 10 conflicting new definitions of what constitutes an employer or joint employer. If violate one then the other department reclassification pile on. Trial lawyers are finding a new revenue stream as a result.

        • Darren Suggs says:

          There is more to this from the viewpoint of the salaried employee, who needs a steady pay check. How about a rainy week when they don’t have work to do, dump trucks don’t roll in the mud, heavy equip, ect. They still have those bills but NO income? I have a salary employee who is not happy about going on hourly. Some weeks we have plenty of jobs and some weeks where we are more caught up… he has guaranteed income. Not with this legislation?

  3. Rick Daniels says:

    Please understand, all Americans have the right and ability to negotiate their pay scale per the training and education they have obtained. The 19 year old assistant manager at Wendy’s deserves $47,474.00 a year for a entry level position at a fast food place. This is what is wrong with the country today, people think they are entitled. America is a Capitalist Country, the harder and smarter you work the more money you may receive. I feel pay is earned and not deserved. The federal government needs to quit regulating against Business, or America will have no employers.

    • Darius Grimes says:

      And that is with the fast food industry now only works employees 24-32 hour a week. You have to have 2 jobs to make as much as you used to be able to make working at one job. They just hire more managers at 25K a year to cover shifts so no salaried expempt employees work over 40 hours. There is a profitability bonus penalty for most managers at franchises for mismanaging the business and allowing overtime. Efficiency is required or your fired.

    • LA says:

      #1 – A lot of employers don’t agree with your assessment that “ALL Americans have the right and ABILITY (?) to negotiate their pay scale per the training and education they have obtained”. Most companies in the U.S. – private and public sector – have structured pay scales and pay caps, and there is NO negotiating your pay.

      #2 – The rules do not dictate that you have to pay a 19 year old assistant manager at “Wendy’s” (your example) a $47,474.00 annual salary. The intent is to protect said 19 year old assistant manager from being paid the equivalent of slightly above minimum wage per hour and being classified as salaried exempt just because they are a manager, and then being worked 50 or 60 hours a week without being paid overtime. I agree a 19 year ASM is probably not worth $47K/year, so they would need to reclassify them and be changed to hourly, or kept at their current salary (whatever that is) and then the company would simply have to make sure the job gets done in 40 hours, or they pay overtime. Correct me if I’m wrong, but not all employees who are managers are paid as salaried. It’s just customary to do so.

      #3 – I don’t think there is an American worker anywhere in the country that would disagree with you that “the harder and smarter you work the more money you may receive . . . pay is earned and not deserved”. Tell that to all the employers – large and small, private and public sector – who employ teachers, police officers, firefighters, heathcare workers, those in the service industry, (etc. etc.) who don’t see it the same way. There are segments within ALL of these industries that have fixed wages and salaries regardless of skill, experience, education, effort, or productivity. It is demoralizing to know that even though you worked twice as hard as your co-worker, you get paid the same amount, and will get the same pathetic raise, if any at all, as your slacker co-worker. And it is even worse when your employer takes advantage of you, and forces you to work an unreasonable number of hours a week on a meager salary with absolutely NO monetary insentive to do so. So the harder you work, the more money you make for the company, and you watch someone else get rich???

      And, NEWSFLASH!! These kinds of unfair labor practices have been going on for decades – so don’t blame it on new government regulations. If you as an individual worker or employer have been fortunate enough to have not experienced the kind of exploitation and abuse that leads to the creating of government regulation, consider yourself fortunate. But believe me when I say, this is not the case for millions of American workers.

      This overtime rule is not perfect. Implementation should be phased in over time, and maybe the salary threshold should be on a sliding scale based upon different regions of the country. But something has to be done to hold the companies who do exploit workers accountable, because they are not going to do the right thing on their own.

  4. L Wenrich says:

    I will not be renewing my membership to NAHB, and I am so sorry that my hard earned funds went to support this. Workers who work overtime deserve overtime pay.

    • Darius Grimes says:

      There is nothing that prevents you from paying it, the ruling only stops mandatory pay for anyone earning less than 47K. This affects far more than just the construction industry and that is why 21 states have filed a lawsuit to delay implementation and so it can be introduced over time and not all at once. No one is trying to deny overtime pay, that is ridiculous.

      • lupe curiel says:

        Are you kidding me, when was the last time ANY company paid O/T when they’re not mandated by law. Even when the company is mandated by law they’re always trying to find a loop hole, just like TRUMP not paying federal income tax, because he’s smarter than the rest of us, or maybe he just expects the rest of us to pay his portion because that’s what red blooded americans do, we pay our taxes for schools, police, fire depts. roads, and on and on. I think it’s time we all start taking responsibility for what we’re all suppose to be doing, not just when it’s convenient.

        • Jon Gunn says:

          I am for this legislation. A major problem with any of this legislation is that the rules are applied equally to small businesses and large corporations. When corporate CEO’s are making millions a year and claim they can only pay salaried managers $9.60 per hour (60 hour min weeks w/ time and a half for overtime) you have a broken system. I have worked in the architecture field and have seen every possible way an employer can devalue an employee (internships, salary with a bonus of 1/40th of salary for over 40 hours etc.). Unfortunately workers only have the government to look out for them. For the record I am currently employed in a small firm and paid adequately and treated wonderfully, too many of my fellow Americans are not.

      • RY says:

        Amazing, Darius, how so many on this forum don’t seem to be able to read, or think through, the points you’ve clearly made here. And, then there’s the person that blamed Trump for his woes. Very sad commentary on the common demonator of our intelligence these days.

        • Darius Grimes says:

          And that is exactly why being a member of these organizations is so important. Membership gives you watchdog updates and defends business against well-meaning bureaucrats living in a vacuum that have no idea of what it takes to run a business or the costs to comply with additional well-meaning regulation. Regulation to protect employees from physical harm and danger is good, regulation designed to increase fees while intruding on the employer/employee relationship surrounding compensation is intrusive and has the exact opposite reaction of what it intended. Successful business do not operate in a vacuum, they adapt to market conditions, and that adaptation as of recent has hurt the ability of American workers to get a job and make higher wages. We need the Fed to remove their jackboot from the throat of American businesses.

          What many are totally unaware of is that with over 400,000 regulations on the books (90,000 added during the Obama Administration) it is literally impossible for any business NOT to be in violation of a regulation every single day. Those that disbelieve have not fallen into the web yet and when they do they will find out that ignorance is no defense.

          Today’s regulations cost the US business community 2 trillion a year in paper pushing and compliance costs. America spends 2-4 times more on attorney fees defending themselves from lawsuits and regulatory violations than any other free county. It is not because American business people are bad actors, it is because we have an out of control federal government that needs to be reigned in tightly and voters that are apathetic or uninformed living in a vacuum and failing to realize the real dangers of this progressive path to their freedom and liberty.

          • Martin Knezovich says:

            Although wordy, the responses still didn’t address the reasoning behind the regulations you’re against, and why that reasoning is flawed. Also, if few government regulations is the ultimate utopia for a successful economy, I would think that approach would be in effect somewhere on this planet. So where is that?

          • Darius Grimes says:

            Martin I understand you r question but I might turn that back on you. How does raising the overtime threshold for salaried exempt employees from 23.5K to 47K in one fell swoop with very little time for implementation do anything to help anyone.

            The proposed roll out is to phase this in over a 2 year period so industry has tome to adjust. What I do support is the Fair Tax a national sales tax that eliminates the IRS, payroll taxes, and vat taxes in favor of a national sales consumption tax. The current progressive tax code with all of its loopholes and attempts to control markets and determine winners and losers is laborious and the cost of compliance is not helping the economy or growing jobs. Even my first job (16 yrs old) as a dishwasher when the min wage was $1.50 did not limit my ability to get raises in return for performance, I made $1.75 because I worked hard and was very appreciative that I had the ability to earn my own money.

            Well meaning regulation designed to make the playing field “fair” are intrusive. Regulation to promote a safe work space and promote equal opportunity are not intrusive. The government does have authority to protect he general welfare of its citizens.The Pledge of Allegiance and the Declaration of Independence do not guarantee equal outcomes, fairness, or even safety nets. What they do guarantee is individual sovereignty and opportunity to pursue what makes you happy. I have seen many people that are only happy when they have something to complain about or they think they deserve rather than work for something.

          • Martin Knezovich says:

            If the initial overtime threshold legislation had included automatic annual inflation adjustments, the latest increase mandate would not have been necessary. It’s similar to the minimum wage regulation and discussions. Labor laws designed to help the working class economically have always been resisted by a certain political party, and by not including automatic adjustments for inflation is just one example of that resistance.

            Regarding the discussion about government regulation in general, let’s not forget that it was during the last federal administration that we suffered one of the worst depressions of our industry, before the ACA and all those other new regulations you claim are holding us back. If we were to make a simple cause and effect of legislation analysis, it would certainly appear that any new legislation enacted over the past 8 years has been very beneficial to our industry.

    • Darren Suggs says:

      People who cannot work because of rain or weather, lack of jobs ready to start, deserve to get a anticipated pay check if the arraignment is mutually beneficial to both parties? Key words is mutually beneficial.

  5. Lee Allen says:

    How could the Federal Government dictate the same mandatory pay rate of $47K in rural areas where the cost of living is much less than big cities like Los Angeles or New York City. The entire regulation makes no sense. Thank You NAHB for your work on this.

  6. Patti says:

    I have 2 employees that are salaried. They currently do not actually work 40 hours per week. It is usually a lot less. So how would this work that if they were to actually work 42-45 hours a few weeks a year but not work 40 the rest of the time? So am I supposed to continue to pay the salaried wage and overtime even though the employee doesn’t work 40 hours as a general rule?

    • Darius Grimes says:

      Good Question Patti. If you have been paying them a salary first you have to start tracking and keeping a record of the hours they work, administrative burden. If they work over 40 hours in any week you have to pay them overtime, it is not cumulative it is calculated weekly. This only affects Salaried Exempt employed, many of the examples used in responses are actually salaried non-exempt employees and are already subject to overtime pay regardless of how much they make.

      This affects every type of business with mangers or assistant managers especially retail and restaurant who traditionally work a 50 hour week for less than 47K. And as pointed out by others some markets are already higher due to cost of living and some markets are lower.

  7. David E says:

    Well i say this, i have supervisiors that have a job to do that could be done in under 40 hrs. I pay them a salary based on 45-50 hours, these guys currently make more than what is mandated for this but what i find is people who can get overtime will get overtime. they already work less than they put on their time cards. they dont do the entire job you pay them for and go home. They want to stand around and point and not do any real scheduling all they want to do is open the door in the morning and lock it if everyone else is gone by the 8 hour shift. they talk all day , they dont do what there job description says they must and because they dont do the job in their current scheduled time you think they are entitled to overtime. that dont make sence. these folks are the same folks that have a responsibility to get a job complete, do a small amount of paper work. the jobs dont get done without my involvement and none of the paperwork gets done. The quality help in this nation of entitled generations is going to heck. If we payed them by the hour they would make overtime every week and be even less productive. They do not stamp a time machine they write in there time.

    How can the government tell me whats wrong here. these guys get more pay and more benefits than the people doing work for them yet blame everything that goes wrong on somebody else and they are suppose to be managers. Gee wiz. they don’t earn what they get 70% of the time. In all cases its about spending your time being most effective and they choose to do what they want. Buy your kids books , send them to school and they dont learn anything. its a case of them knowing what they can get by with and then they do it. Employees make more than me, 2 hour lunches , 30 minute breaks and they dont care weather you catch them or not because its a busy time and they would really get unemployment because they dont have to work for it. Some would rather have a job that has no responsibility and one where no labor is expected. All I can say to that is Me Too!

    • LA says:

      Wow – sounds like you are surrounded with individuals with a really poor work ethic, and managers who don’t know how to train, manage, or hold people accountable. No amount of government regulation good, bad, or otherwise, could fix those problems. Those are internal problems that need to be fixed in house!

  8. Tim says:

    What a disgrace to the industry. People looking for any loophole they can to get out of paying somebody OT when they go over 40 hrs.
    Instead they want somebody making $10hr+ change to be salaried. Salaried means you can work them 45, 50, 60 hrs a week for the same $400. $400 week divided by 60hrs equals $6.67hr.
    Are proud of that!!
    The overtime rule means just that- If they work over 40 hrs they get time and a half.
    It does NOT say that you have to pay $47,000 a year.

    • Christine says:

      It’s a bit more complicated than that…If they are exempt from overtime (ie. salaried) you DO have to pay them minimum $47,745/year. You have to log hours and pay them overtime if they are NOT salary exempt. You must choose one or the other designation. Usually to be exempt you must be in a management role or outside sales position, there is a test by state to qualify for exemption they must “pass” in order to qualify as exempt.

      It’s not a matter of wanting to cheat anyone (in my company anyway), it’s a matter of proper classification and a newly imposed minimum that may or may not fit the role (now up to the government instead of the employer).

      • Tim says:

        That is the obvious intent of the law. Salaried position means pay the $47,745 and that is the way it should be.
        It is ridiculous to think that somebody that is only making $11.45 an hr is “management”.

        Paying someone that low of a salary and calling them management is wanting to cheat someone. No different than the 1099 person that really is an employee.

        • Darius Grimes says:

          Tim, You keep talking about hourly workers already subject to overtime rules and comparing them to managers who get bonuses and other perks like a vehicle etc for bring projects in on time and under or at budget. That is apples and oranges and a poor analogy. No one is suggesting a non-exempt employee wouldn’t be paid overtime, that is what managers are for is to make sure those employees do not make overtime unless its an emergency. I think you are really confused regarding exactly what this is and how it affects every business. Take a fast food manager making 35K a year, not instead of working what is typically a salaried position that requires a min of 50 hours, they will be restricted to 40 hours and their pay will have to be adjusted accordingly. So instead of them making 35K they will be reduced to 28K. Companies adapt to keep costs down because consumers are not just going to pay more in a vacuum, they will find more competitive pricing. This actually promotes the use of subs over employees. Just like the fast food worker idiots asking for a $15 min wage. They have now priced automation lower than entry level positions and will find themselves replaced by automation. A job at $10/hr is better than no job at all, they seem to think they are somehow indispensable, no one is, even managers.

          • Tim says:

            I am not confused.

            If Company A can get by with making their employee work 60 hrs a week, call them salaried, and only have to pay them for 40 hrs @$11.45 an hr, or pay them for 40 hrs @ $11.45 and then have to pay them for 20 hrs @ $17.18hr….guess what?
            The point is they will not get OT because they will be moved to “salary”.

            You seem to think that because somebody becomes “salaried” they automatically are going to get bonuses, company vehicles, company credit cards.

          • Darius Grimes says:

            Tim, You are over complicating this. If an employee is being paid an hourly wage then they CANNOT POSSIBLY MEET THE DEFINITION of an Salaried Exempt employee, and this regulation has no affect on them one way or the other. Currently an hourly employee is required to be paid overtime and the employer is required to keep a time card. Salaried exempt employees do not punch a clock and the salary is responsibility and performance based usually with bonuses and other value added perks.

            You can’t hold a Federal gun to Peters head to make him pay Paul more money if Paul has not conversely done something to add value to offset the new salary and its impact on regulatory compliance costs and payroll taxes. This regulation will punish Paul not Peter, Peter will adapt to make it work. Paul is now going to be punching a clock, and will be restricted in work hours which will likely result in the loss of income, potential bonuses, and other perks.

            When you own your own company and have put everything you own on the line to make it successful you will immediately understand what I have been saying in my posts.

  9. Martin Knezovich says:

    Regulations, and lots of paper work, are not unique to the home construction industry. In fact, compared to many, our industry gets off relatively easy. That’s just part of the job as an owner of a business. If you think it’s too hard, try taking a sabbatical and strap on the toolbelt and lift walls, or shingles for a while. I think you’ll miss the air-conditioned truck and office pretty quickly. I always knew and appreciated the value of having craftspeople who just wanted to do their craft, and take the physical beating that came along with it, while I was able to make a profit off their labor. Appreciate the position you’re in, and be thankful for the prosperous time we’re enjoying right now in the home construction business.

  10. Timothy J Meyer says:

    If American business didn’t treat employees like expendable dirt and seek to minimize what they are paid at every opportunity then we could get by with less regulation.