OSU rescinds pay raises after court overturns Biden overtime rule: Will other employers follow?

Dec. 13—Ohio State University recently rescinded pay raises for 306 employees after a federal court decision in November overturned a new federal rule making more people eligible for overtime pay.

Two Dayton region experts that advise businesses say they don’t know of any local employers who raised wages to avoid the overtime pay requirement and then rescinded the pay increases after the court ruling.

“I am pleased to say I have not heard of anyone acting in advance of this ruling and then having to ‘back-pedal.’ Our recommendation was to plan for it but not take any action until the date of the change in the event that it was repealed,” said Patti Dunham, Cincinnati-based director of business strategy and quality at Clark Schaefer Strategic HR.

“Such an action would most likely lead to a negative response and impact on employee morale that just didn’t seem worth it to most — especially with the consideration that some variation of the changes may come down the line after all of the appeals, as it did in 2020,” she said.

The impacted Ohio State employees, who are non-union workers in various jobs at the university including in the Wexner Medical Center and Department of Athletics, were notified they were getting a raise before the rule was struck down, said Ben Johnson, spokesman for Ohio State University.

That decision was first reported by the Columbus Dispatch.

Johnson said the employees will receive the increased salary for November and December and then revert to their previous salary in January. Had the pay increases remained in place they would have cost the university $2,047,000 annually, Johnson said.

“Ohio State values our more than 50,000 employees and appreciates their contributions to the university and its mission,” Johnson said. “University employees are eligible for annual merit increases, salary adjustments based on market rate, and promotion. We strive to be an employer of choice for individuals from across Ohio and beyond.”

Hannah Halbert, executive director of Policy Matters Ohio, a liberal-leaning think tank, said Ohio State’s decision to rescind the pay raises shows why the now-overturned higher threshold rule was so important to working people.

“OSU demonstrated the need for this rule when they rescinded raises given to employees to avoid having to pay them overtime when the rule took effect. In essence, these workers are in roles that work more than 40 hours a week, and OSU will pay them only enough to keep those workers out of the overtime rule,” Halbert said.

“Overturning the updated overtime rule and reports of some employers rescinding raises they awarded in anticipation of that rule going into effect are decisions that would make Ebenezer Scrooge blush,” she said.

Court ruling

At issue is a U.S. Department of Labor (DOL) rule finalized by President Joe Biden’s administration in April that increased the minimum salary threshold allowing certain salaried employees to be exempt from overtime pay if they meet certain job duty requirements. Workers making below the threshold must be paid overtime at time-and-a-half for each hour worked after 40 in a week.

Under that new rule the threshold for certain executive, administrative and professional employees increased from $35,568 per year to $43,888 annually in July, and was to rise to $58,656 on Jan. 1, according to the DOL website.

Business groups and the state of Texas sued the DOL in U.S. District Court for the Eastern District of Texas, just as they had when then-President Barack Obama’s administration attempted in 2016 to boost the salary threshold. The court on Nov. 15 overturned the new rule, as it earlier had done in 2017 with the Obama Administration rule.

In November’s ruling the court said the DOL exceeded its congressionally-granted authority and took issue with the frequency and size of the threshold increases, which the court said disrupted the “balance of the multi-part salary and duties test,” according to an analysis of the decision by Missouri-based law firm Lathrop GPM.

The threshold reverts to $35,568, which was set in 2020 by then-President Donald Trump’s administration after it did not appeal the court decision overturning the Obama-era rule.

“It is an unfortunate but predictable replay of how overtime was dealt with in the first Trump administration. In 2016, the overtime rule was modernized, raising the threshold for salaried workers to $47,476 and tying the threshold to inflation,” Halbert said. “The Trump administration replaced the rule with a much weaker one. The Trump overtime rule, which is current law, was estimated to bring in $1.4 billion dollars less in wage improvements than the original 2016 rule.”

She said the $35,568 threshold “allows some employers to exploit workers and creates broader wage suppression.” An estimated 4.3 million workers nationwide would have benefited had the Biden rule not been overturned, she said.

Impact on businesses

The Biden rule was a threat to small businesses and rolling it back was a top a priority, said Chris Kershner, president and CEO of the Dayton Area Chamber of Commerce, in an interview after the Nov. 5 presidential election won by Trump.

“This original (2024) DOL rule was a huge administrative burden for businesses as they determined the financial and administrative impacts on their businesses,” Kershner said this week. “The November 15th ruling out of Texas was a significant step forward in addressing this issue for businesses across the country and in Dayton.”

The Biden administration appealed the Nov. 15 court decision. Trump takes office again in January and his office did not respond to a request for comment on whether he will drop the appeal.

“I will be very surprised if the Trump Administration continues the appeal,” said Douglas C. Anspach Jr., partner and co-chair at the Taft law firm in Dayton.

He said it’s possible Trump would try for a “more modest increase,” given that DOL raised the threshold during his first term.

Both Dunham and Anspach said area companies that raised wages when the first phase of the overtime rule went into effect in July have not reversed those raises.

Dunham said none of her company’s team of more than 40 consultants has heard of a client removing the July increase and most were awaiting the court decision before taking action on the January increase.

“The reality is that the July increase didn’t have a significant impact on most employers. Most employees who are properly considered ‘exempt’ under one of the white collar exemptions were already making more than what the threshold was increased to in July,” Anspach said. “It was the January increase that would have resulted in major changes.”

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