Businesses look ahead after overtime rule blocked

Last month, Willie Hobbs and his co-owner at Great Northern Cycle and Ski in Whitefish were crunching numbers to figure out how they would be able to pay themselves on the budget they had set. This was in reaction to a new federal regulation on overtime that would more than double the threshold requiring employers to pay overtime to employees. Starting Dec. 1, everyone making less than $47,476 a year would have been entitled to overtime pay, up from the previous $23,660 a year threshold. 

But on Nov. 22, a federal judge in Texas granted a preliminary injunction blocking the overtime rule from taking effect nationwide.

“Once we found out that it wasn’t going to go into effect, we just didn’t go down that road any further and stopped number crunching,” Hobbs said. “It’s a nice headache we don’t have to deal with. In some instances and other industries, I think it’s a good thing that does need to be implemented. But our situation is one with unexpected consequences.”

Hobbs knows that eventually the overtime threshold is going to rise, so this new complication isn’t completely off the table, it’s just further away for now. He said he and his business support employees being fully compensated for their work, but his situation at Great Northern Cycle and Ski is one that would have been convoluted by the new rule.

The injunction comes at the right time for Great Northern, as ski season approaching means business is about to pick up for the small operation.

Hobbs and the other owner of Great Northern take a salary that’s below the threshold, but work so many hours that they would be required to pay themselves more than they had in the budget. The current setup allows them to pay their employees — about five, depending on the season — the overtime; only the two owners would have been affected, while the employees that the new rule meant to protect were never being shorted in the first place.

THE RULING came from a 30-page injunction request filed by more than 20 states in September to bar the overtime change from happening. Montana wasn’t among those states to take the matter to court, but the Montana Chamber of Commerce, a private entity, publicly opposed the measure anyway. The Montana Chamber instead has expressed its support for the Overtime Reform and Review Act, a bill introduced in response to the overtime rule. This proposed measure would stretch the leap in salary threshold to a five-year period, rather than adjusting the threshold in one day.

Webb Brown, president and CEO of the Montana Chamber of Commerce, said in a press release that the injunction will allow businesses some time for more input and time to brace for the new rule at a local level, before it takes effect nationwide.

“If the overtime rule had taken effect Dec. 1, it would have resulted in significant new costs as well as many disruptions to how work gets done,” Brown said in the release. “This decision gives us, the Montana business community, time to develop solutions that work in our state.”

In Kalispell, local chamber president Joe Unterreiner said Flathead businesses had already initiated adjustments within their companies to accommodate the new rule, and now are dealing with the unexpected consequences of simply being prepared.

“Are they going to readjust those schedules and move forward with the changes they were implementing? I think it remains to be seen how businesses will adjust to that [injunction],” Unterreiner said. Those that were behind, he said, were still scrambling to understand how their businesses would be affected.

THE OVERTIME rule originally was called for by President Barack Obama in his final year of office. Now, with President-elect Donald Trump’s administration taking over in January, Unterreiner is not sure what will happen after the injunction.

“I think it will likely extend into the new administration,” he said. “At that point, it’s not really known how the new administration will proceed; what kind of action they will take on, if any.”

It’s plausible that many high-paying jobs around the Flathead would have been less affected by the new rule than smaller operations. At Nomad Global Communication Solutions, human resource manager Ronda Wakefield said the new rule would have impacted just three employees; the rest were already above the threshold. Wakefield the company and those three employees aren’t holding out to see what happens after the injunction.

“Just because there’s an injunction out there doesn’t mean it’s over. Regardless, we’re making plans and moving forward,” she said.

Wakefield also serves on the Flathead and Montana chapters of the Society for Human Resource Management, where she hears both sides of the issue. While employers typically breathed a sigh of relief when the injunction came down, she said, employees who had been offered a raise above the threshold in order to reach the overtime exemption were let down.

“Employers who would have taken a huge hit knew it was going to impact morale and it was going to impact a lot of things,” she said. “But those employees who were looking forward to that raise in pay, that was a hit to them.”

Larger corporate operations in the Flathead Valley might have more resources, like fewer people on salary, to keep salaried employees from draining the overtime pay pool. Kim Carson, the general manager at La Quinta Inn and Suites in Kalispell, said she would have simply monitored her paid time to keep from racking up too much overtime.

“That is something we discussed as a company,” Carson said. “I’m the only salaried employee at the hotel ... so I’m the only one who it would have affected. I just would have paid attention to my hours.”

Back at Great Northern Cycle and Ski, Hobbs said he’s happy he can still pour some sweat equity into his business, for now. Until then, the ski season is calling customers to the shop.

“I’m sure something will get put in place,” he said. “We’ll analyze it when the time comes.”

Reporter Seaborn Larson may be reached at 758-4441 or by email at slarson@dailyinterlake.com.