PITTSBURGH _ The first expansion of federal overtime rules in more than a decade meant raises of up to 5 percent for many workers at the University of Pittsburgh Medical Center. It meant other employees could, for the first time, count their hours and receive more pay for extra hours worked.
But the changes, which UPMC had planned to take effect last weekend, were abruptly put on hold by the health system.
UPMC is not alone.
Many businesses across the country are taking similar actions after a federal judge in Texas last week issued a nationwide injunction that blocks a rule on overtime eligibility from taking effect on Thursday.
In May, federal officials expanded overtime eligibility for millions of more Americans _ one of the Obama administration's landmark labor policies and the first federal expansion of overtime since 2004.
In his ruling last Tuesday, U.S. District Judge Amos Mazzant sided with the 21 conservative states and business groups that filed motions in opposition to the rule.
Pending a final decision on the rule from the courts, many employers say they will keep their payrolls the same.
"Rather than make the changes now and then have to make further or perhaps reverse these changes in the future, we are going to place our planned changes on hold and wait until the final determination has been made," wrote John Galley, UPMC's chief human resources officer, in an email to hospital presidents and other UPMC leaders.
A spokeswoman for UPMC on Monday confirmed the company's decision to put the raises on hold, but declined to comment further.
The ruling is a major setback for worker advocates, still reeling from the upset election this month of Donald Trump that threatens to upend many of President Barack Obama's policies. But the decision also marked a victory for advocacy groups that characterized the overtime rule as government overreach and provides some relief for employers that were scrambling to meet the deadline.
The delay effectively gives Trump, who takes office in January, an opportunity to take a shot at undoing the rule. Though he has not yet indicated a specific stance on overtime, Trump has said rolling back Obama administration regulations is key to stimulating economic growth.
Under the rules in question, certain salaried workers making up to $47,476 a year would qualify for overtime pay when they work more than 40 hours a week. Currently, only workers making up to $23,660 a year qualify _ excluding an estimated 4 million managerial workers nationwide that could qualify for overtime pay for the first time.
To comply, employers would be required to either track hours and pay overtime to newly qualified workers or raise salaries above $47,476 to keep them exempt. Along with retail business groups, nonprofits and social service organizations expressed concerns that they would have to lay off workers or sacrifice services because their revenue, based largely on Medicaid funding, would not proportionally increase after the rule went into effect.
Roughly two-thirds of workers across 4,000 disability providers nationwide would qualify for overtime, according to a study by the American Network of Community Options and Resources, a Washington, D.C., group advocating for disability service providers.
To cover five hours of overtime a week, service providers in total would pay $1.05 billion. To raise salaries to the new threshold, providers would pay $1.87 billion.
The group insisted it supports a wage increase for its workforce, which suffers from widespread vacancies, and is pushing for legislation in Congress to increase Medicaid funding temporarily for the next three years to help cover costs.
Still, many providers have reported keeping their plans intact, said Gabrielle Sedor, chief operations officer for the group, which scheduled an "emergency call" with its members on Friday.
"Most of them, because they've already prepared and communicated the changes to their employees, feel like they really don't have a choice but to go forward," Sedor said. "It's a morale issue. It's doing what you said you would do. But it's very tricky."
Earlier this month, as Judge Mazzant neared a ruling on whether to delay the overtime expansion, UPMC, the largest private employer in Pennsylvania, recognized it needed to potentially change course.
Galley sent an email advising HR leaders that its plans to comply with the rule, which were discussed at company committee meetings in August and October, would be put on hold "pending the final determination."
Though the explanation to staff is "fairly straightforward," Galley said, he recognizes "this is a difficult issue and the timing of the potential shift in direction is certainly not ideal."
An employer's move to eliminate higher pay may be simple, but it's not without pitfalls, according to a memo on Monday to its clients from Sisterson & Co., a Pittsburgh public accounting and consulting firm.
"The benefits of a wait-and-see approach are that there's no disruption to the status quo and, in most cases, there will be no spike in payroll costs," the firm noted. "That approach may also bring risks, including having to scramble to make adjustments if the regulations ultimately are upheld."
Further, there is some precedent for an employer being liable for back wages going back to the Dec. 1 starting date if the regulations are eventually upheld.
The firm also advised employers to consider the intangible losses of revoking an employee's pay bump a week before it's set to take effect. "Withdrawing an employee's promised raise could adversely affect the relationship with that employee," Sisterson & Co. said.
Joseph P. Nicola, a tax partner with Sisterson, said in an interview that local employers are still working through their options with their lawyers. But he said, "It is likely that if an employer has raised a salary of an employee, then most employers are going to be loath to take that increase back."
On the other hand, employers could more easily move an employee back to a salary status from an hourly status, he said, though that could create conflict among employees, too.
In a slew of statements, advocates for the rule expressed surprise and disappointment at the news. They characterized the expansion as aimed at middle-class retail and office employees who traditionally work long hours for little pay.
"Unfortunately, for the time being, workers will continue to work longer hours for less pay thanks to this obstructionist litigation," said Christine Owens, executive director of the National Employment Law Project.
