Federal Court Halts New Rule That Would Have Provided Overtime Pay For Millions

Last May, the U.S. Department of Labor finalized a new rule that would have greatly expanded the number of American workers eligible to collect overtime. That rule was slated to go into effect on Dec. 1, but last night a federal judge in Texas put a temporary halt on the updated rule.

Federal law currently only requires overtime pay for those earning up to $23,660/year ($455/week). The new rule [PDF] raises that threshold to $47,892/year ($921/week). According to Labor Department calculations, that would have made around 4.2 million additional Americans eligible for overtime, the majority of them in the 25-44 age range.

Additionally, the salary threshold for overtime eligibility would be automatically updated every three years. It has been more than a decade since the last significant change in this standard.

Those in favor of the rule change argue that it will improve the livelihoods of millions of Americans who currently put in more than 40 hours a week but don’t get paid for that time. They contend that some full-time salaried workers are currently making near or less than the minimum wage when you factor in all the hours they put in.

Critics of the rule claim that it will unfairly impact small businesses and non-profit employers, and that companies will switch full-time salaried workers to hourly wage jobs, demote staff, or simply cut employees’ hours.

In September, nearly two dozen states sued the Labor Department and asked the judge to grant an injunction preventing the rule from going into effect.

Last night, U.S. District Court Judge Amos Mazzant granted that injunction [PDF], finding that the plaintiff states had sufficiently established that the Labor Department may have overstepped its authority in setting the new salary levels and devising an automatic update mechanism for the salary threshold.

The government had tried to argue that an injunction would do harm to the public by allowing affected employees to continue not receiving this overtime pay.

However, the judge countered that an injunction was in the best interest of the public, particularly if the government enacted the overtime rule and then lost at trial.

“A preliminary injunction preserves the status quo while the Court determines the Department’s authority to make the Final Rule as well as the Final Rule’s validity,” explained Mazzant.

“We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” said the Labor Department in response to last night’s ruling. “The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule.”

Paul Laxalt, Attorney General for Nevada, one of the states driving this challenge to the overtime rule, applauded the judge’s decision.

“Federal agencies cannot unilaterally reinterpret federal law to impose burdens on state governments and businesses, and today’s preliminary injunction reinforces the importance of the rule of law and constitutional government,” said Laxalt. “Businesses and state and local governments across the country can breathe a sigh of relief now that this rule has been halted.”

Nevada is joined in this challenge by Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin. Though more than half the states are not suing to stop the rule, the injunction applies nationwide.