US court blocks overtime expansion pay rule for 4 million

US court blocks overtime expansion pay rule for 4 million

Blake Casey
November 24, 2016

A federal judge issued a preliminary injunction Tuesday that puts on hold a Department of Labor final rule that would have extended overtime eligibility to many senior living employees and others effective December 1.

The Labor Department issued a rule that requires employers to pay their employees overtime if they exceed 40 hours work in a week and are earning less than $47,500 annual salary.

Back in May, the Wage and Hour Division of the Department of Labor announced the Fair Labor Standards Act, which "guarantees a minimum wage for all hours worked during the workweek and overtime premium pay of not less than one and one-half times the employee's regular rate of pay for hours worked over 40 in a work week".

While CBO estimated that the new rules would extend overtime eligibility to an additional 3.9 million workers, it found that only about 900,000 of those employees now work enough hours to actually receive overtime pay, or 0.6 percent of the US workforce.

Under the new rules, announced last year and championed by U.S. president Barack Obama, employees making $47,476 a year (or $913 a week) would be eligible for overtime, a big jump from the previous threshold of $23,660 (or $455 a week).

U.S. District Judge Amos L. Mazzant III in Sherman, Texas, rejected a request by the federal government to limit any order to the states that filed the lawsuit and issued a preliminary injunction blocking the new salary cutoff nationwide. The Protecting Workplace Advancement and Opportunity Act proposes to nullify the new overtime rules and prohibit automatic increases to the salary threshold. The changes would affect approximately 4.2 million workers not now eligible for overtime under federal law, according to the Labor Department.

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The legal challenges to the rule originated as two separate complaints-one by a group of twenty-one states and the other by a coalition of more than 50 business groups. Opponents to the rule change said the new law would impose undo stress to many businesses, forcing more time-sheet paperwork and effectively reduced paid hours for employees.

The lead plaintiff seeking to block the change was Nevada Attorney General Adam Laxalt, a frequent critic of what he calls overreach by President Obama's administration. The case had been brought by 21 states and several business groups, including the National Retail Federation and the U.S. Chamber of Commerce.

That salary threshold is about twice what now allows workers to be exempted from overtime.

Others think it unlikely this lame-duck administration will be able to revive the rule before Donald Trump takes up residence in the White House.

Thus, the judge ruled "his holding does not apply to historic salary level tests - just this new one", said Gerald Hathaway, a partner at Drinker Biddle & Reath in NY, in e-mailed comments "And this is the fundamental flaw of the decision". But that could be a long process and put key decisions about fighting for the rule in the hands of President-elect Trump, who takes office on January 20.