A federal judge in Texas recently blocked a rule that would have expanded access to overtime pay to millions more salaried workers across the U.S. Small business owners have expressed mostly positive reactions to this decision, as it means they can better manage labor costs. On November 15, the judge halted the implementation of a new regulation that was to take effect on January 1, raising the salary threshold for overtime eligibility from $35,568 to $58,656 a year. The previous threshold of $35,568, which was set under the Trump administration in 2019, remains in effect.
Nearly all hourly workers in the U.S. are entitled to overtime pay after 40 hours a week. However, many salaried workers are exempt unless they earn below a designated level. The now-defunct rule would have marked the biggest increase to that cap in decades.
Guillaume Drew, founder of Or Zon, a New York-based sustainable home goods company, noted that overturning the rule helps him keep labor costs down.
Labor cost concerns for small businesses
“It’s important employees are paid fairly, but this allows us to offer incentives like spa days or remote work instead of overtime pay,” he said.
Sheldon Sutherland, owner of Epoxy Werx in San Diego, also praised the decision. “Managing labor costs is critical for small businesses, and the proposed change would have significantly increased expenses,” he stated. “This ruling maintains our financial stability while offering competitive wages.”
Small business organizations like Small Business Majority and Small Business Entrepreneurship Council have also applauded the decision.
John Arensmeyer, CEO of Small Business Majority, said, “Blocking the increase prevents sticker shock for small businesses still recovering from the pandemic.” Karen Kerrigan of the Small Business Entrepreneurship Council added, “The ruling allows employers to align compensation with the needs of workers and the marketplace.”
However, not all small business owners agree. Stephanie Penn, owner of Tee Honey, an online t-shirt boutique in Southfield, Michigan, believes the rule would have promoted fair pay and better productivity. “Fair pay helps avoid disputes about compensation, and striking down the rule burdens businesses like mine that strive for fairness,” she said.
“It leaves room for inequities that could harm morale and retention.”
The decision underscores the ongoing debate over labor costs and fair employee compensation, highlighting the varied perspectives within the small business community.
