The Department of Labor was forced to roll back its regulations on the expanded overtime rule and the consequences are already apparent. Ohio State University has canceled the employee raises that it had announced for over 300 workers in November and December.
According to The Columbus Dispatch, Ohio State had made salary adjustments that amounted to around $2 million in total after the DOL’s minimum wage threshold for overtime payment went up earlier this year in June. The regulatory change was finalized in the spring and was expected to roll out in two parts, with the next phase scheduled for January 1, 2025, however, a Texan judge ruled that the DOL had overextended its authority.
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Ohio State Cancels Employee Raises—Employers Are Expected to Continue Reversing Wage Hikes
Ohio State’s decision to undo employee raises is a controversial one but not unexpected. The information was revealed via an email from Katie Hall, who is the Senior VP of Talent, Culture, and HR at OSU, and Sarah Sherer, the Senior Associate VP and CHRO at the organization. The email informed around 306 Ohio State workers that the pay hike on their base pay that had been offered to them recently was coming to an end on January 1, 2025.
“We know this is disappointing, and we want to provide a six-week advance notice that will give you time to plan ahead,” they explained in the email. “Given the reversal in the law, we will continue to focus on impact and decisions that consider all of our staff and the university.”
The employees’ raises totaled approximately $2,047,000, and the employees were from a range of different departments and colleges from across the university. Considering that the wage hike was given by OSU to adhere to the federal overtime rule, the reversal in pay policy is no surprise.
More employers who have promised a rise in pay as a part of the regulation will likely rescind their offer in the coming months.
Why Did Ohio State Rollback Overtime Pay?
The DOL federal overtime rule at the heart of OSU’s decision, increased the minimum wage threshold for overtime pay from $35,568 to $43,888 in July. In January, the threshold for overtime pay under the Fair Labor Standards Act (FLSA) was expected to increase for a second time in less than a year, moving up to $58,656.
This meant that more workers with lower wages would be eligible to receive higher compensation for overtime work if they were on the job over 40 hours a week. Employers who realized that the overtime wage payout would be higher than just regularly paying better salaries increased the pay for workers who felt below the threshold. This improved pay was a welcome change for workers and proved that employers were in fact capable of paying higher wages if they wanted.
However, after pushback from Texan businesses, a federal judge reviewed the case and eventually put an end to the adjustment plans. The judge found that the overtime rule put a greater emphasis on pay as a qualifying factor instead of taking job duty into consideration as well.
Employers who had increased the pay for employees now had the option to leave pay at the new sum since it had already been promised to employees, or go back on their word and rescind the offer. Ohio State’s overtime pay rollback makes it apparent which option was preferred by the university.
The DOL has appealed the ruling and some businesses are waiting to see what happens before they also move to undo the raises offered in relation to the shift in regulations. The DOL’s odds of winning the appeal remain slim, but HR experts warn against repeatedly offering and reversing decisions in relation to pay as this can be greatly demotivating to employees.
