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Companies are Still Honoring Obama’s Blocked Overtime Rule, Blunting $1 Billion Cost Benefit

Although many U.S. businesses will start saving money from today thanks to a court injunction blocking Obama's proposed overtime rules, not all CEOs are jumping at the opportunity.

A snap survey of retailing companies, for instance, has found that more than half intend to abide by the blocked rule, with some taking a wait-and-see approach and others reluctant to roll back adjustments already communicated to staff.

The new rule, which was scheduled to come into force today, would have doubled to $47,500 the maximum salary that millions of workers could earn while still being eligible for mandatory overtime pay.

“More than half of people surveyed intend to abide by the blocked rule.

Last week, a federal judge granted opponents of the rule a temporary injunction ahead of a final decision at a yet-to-be-determined date. Although the judge’s ruling was perceived by legal experts as fairly definitive, the Labor Department said it’s considering an appeal. The election of Donald Trump, meanwhile, has placed any legislation seen as harmful to business on shaky ground.

The injunction was hailed by business groups as a major win that could save companies more than $1 billion in combined costs. But many executives had already spent months preparing for the introduction of the new rule, either by lifting some staff’s salaries above the $47,500 threshold, redefining positions or rejigging rosters.

America’s biggest retailer, Walmart, recently increased the salaries of some workers by $3,500 to $48,500 to ensure it wouldn’t have to pay them time-and-a-half for working more than 40 hours a week. The company said this week that it has no plans to claw back the increases.

TJX, the parent company for T.J. Maxx and Marshalls, said it’s implementing the changes required by the blocked rule as planned. “At TJX, we attribute our success primarily to the people we have hired over many years who remain focused on our mission of delivering amazing value to customers,” the company said.

The survey of 68 retailers with combined revenue of almost $1 trillion—conducted by recruiter Korn Ferry’s Hay Group division—found 56% are pressing on with the Obama administration’s rule change. About a quarter of respondents said they will wait for a final ruling or resolution, while a fifth said they will make changes on an employee case-by-case basis.

Telling staff that promised salary or wage increases were no longer valid would be a particularly unpleasant option for managers, according to Hay Group senior Partner Craig Rowley. “This injunction came just eight days before the ruling was to go into effect and many retailers had already either communicated or implemented plans, so turning back was not an option,” he said.


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