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House Moves to Delay New Overtime Rule; Obama Administration Threatens Veto

On Sept. 28, 2016, the U.S. House of Representatives passed a measure that would delay the effective date of the new overtime rule by six months. The Republican-backed measure – known as H.R. 6094: Regulatory Relief for Small Businesses, Schools, and Nonprofits Act – passed by a vote of 246-177. But victory may be short-lived, since the Obama Administration has threatened to veto the bill.

Obama Administration’s Response to the Bill

On Sept. 27, 2016, the Office of Management and Budget (OMB) issued a statement, asserting that the president would veto H.R. 6094 if presented with it.

“While this bill seeks to delay implementation, the real goal is clear – delay and then deny overtime pay to workers. With a strong economy and labor market, now is a good time for employers to provide these essential protections for workers, who cannot afford to wait.”

Strongly opposed to H.R. 6094, the Administration also stated that the bill “would move the implementation of the Department of Labor’s overtime rule until the middle of next year, endangering a critical step toward promoting higher pay and undermining efforts to allow workers to better balance their work and family obligations.”

According to the OMB, many employers, including small businesses, academic institutions and nonprofits, are already taking measures to ensure compliance – and the bill would only disrupt their efforts and cause them uncertainty.

Legal Challenges to the Rule

The overtime rule –which increases the minimum annual salary for exempt white-collar employees from $23,660 to $47,476 – has sparked both controversy and legal actions. As we previously reported, 21 states have banded together and filed a lawsuit against the U.S. Department of Labor. In addition, over 50 business groups, including the National Federation of Independent Business (NFIB) and U.S. Chamber of Commerce, have collectively filed a lawsuit in the U.S. District Court, Eastern District of Texas. Both lawsuits aim to block the new rule, arguing that the Department of Labor abused its authority by radically increasing the salary threshold.

What this Means for Employers

The bill would move the overtime rule’s effective date from Dec. 1, 2016 to June 1, 2017.

But opposition from Senate Democrats is likely; and with the White House threatening to veto the bill, it’s doubtful whether H.R. 6094 will come to pass. The general consensus is that employers should assume that the new rule will take effect on Dec. 1, 2016, and prepare accordingly.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.