Some Indiana employers abiding by overtime rule, even though it’s in limbo

The Obama administration’s new overtime rule is held up in federal court, but that hasn't stopped some Indiana employers from instituting changes to comply with the law.

The rule raised the pay threshold for salaried workers to be exempt from overtime pay, from about $24,000 to $47,476. If fully implemented, the rule could have affected about 87,000 Indiana workers (and 4.2 million workers nationwide), mandating that they be paid for overtime.

Employers had several options. They could raise salaries for those workers to the new minimum threshold of $47,476 and thus avoid paying them overtime; pay them time-and-a-half if they worked more than 40 hours per week (either as salaried employees or converted to hourly workers); or make sure they don't work more than 40 hours per week.

A federal judge in Texas on Nov. 22 to temporarily suspended implementation of the rule, which was to go into effect Dec. 1. Indiana was one of 21 states that sued the U.S. Department of Labor in September over the rule.

Because of the short turnaround time, Indianapolis compensation adviser Julie Bingham said, many employers had already instituted or communicated salary changes to their employees.

“This is truly a unique situation,” said Bingham of FirstPerson Advisors. “Everyone’s scrambling. My sense is that many employers here will likely just let that be the new reality and hold to those increases.”

Wal-Mart, for example, raised entry-level managers' starting salaries from $45,000 to $48,500 in September to stay above the threshold for paying overtime, and has said that it plans to stick with the raises.

The state of Indiana—itself one of the largest employers in the state—implemented its compliance plan on Nov. 20, according to the Indiana State Personnel Department.

That means 69 state employees received salary increases totaling about $140,000 per year.

“The small number of employees that received salary adjustments [will] retain those new amounts,” spokeswoman Ashley Hungate told IBJ. State employees who would have become eligible for overtime under the new rules will remain exempt from overtime.

Ivy Tech Community College had decided to implement its plan “very close” to last Thursday’s effective date, so some people’s salaries were raised, said spokesman Jeff Fanter.

Other changes will go into effect if the rule stands up in court.

“Preparations are in place for a future effective date should the injunction be overturned,” Fanter told IBJ.

But Purdue University decided not to move forward. The rule change would have affected about 1,200 Purdue employees, according to the Lafayette Journal-Courier. About 600 Purdue employees have since been notified that their pending salary increases have been put on hold, while about 600 others were told they would remain salaried employees ineligible for overtime.

Bingham said her firm is not recommending that employers take back increases they have already communicated to workers.

“Some employers, not inappropriately, took it as an opportunity to recommit to their employees not just for compliance but because of performance,” Bingham said. “That’s harder to undo.”