A federal judge in Texas on Tuesday blocked a U.S. Department of Labor rule extending overtime pay to roughly 5 million workers nationwide.
The President Barack Obama-backed rule had been scheduled to take effect Dec. 1, and many employers nationwide, including many in the Triad, had changed or made plans to change the way they pay workers to meet the rule's requirements.
The emergency injunction may or may not permanently block the rule change, but it does block its Dec. 1 mandatory implementation.
"The rule, for now, is off the table," Art Lambert, a labor and employment attorney in the Dallas office of Fisher Phillips, told the Dallas Business Journal.
The injunction was lauded by the National Association for the Self-Employed, an advocacy group for self-employed and micro-businesses.
“The bottom line is that this rule is just burdensome and complicated for America’s small business community,” said Katie Vlietstra, vice president for government relations and public affairs for NASE. “The basic fact is that if the DOL would have evaluated the impact on small businesses and the overall economy, they would have found that it would have impacted them both negatively. From costs to labor management, this rule is bad news for small businesses."
U.S. District Judge Amos Mazzant in Sherman heard arguments in the motion for a preliminary injunction on Nov. 16.
The new rule would more than double the salary threshold for workers to qualify as exempt from overtime pay requirements. The rule would raise that threshold from $455 to $913 per week, or from $23,660 to $47,476 per year.
The rule also includes a provision that automatically raises the threshold every three years.
The effect of the change would be that most businesses, governmental entities and many nonprofit organizations would be required to pay time-and-a-half for hours worked over 40 in a week by those workers making $47,476 or less per year.
Mazzant agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, that the rule is unlawful. In his 20-page opinion, Mazzant, a 2014 Obama appointee, said the rule improperly created a salary test for determining which workers fall under the Fair Labor Standards Act’s so-called “white collar” exemption.
Lambert said he was "stunned" by the legal opinion and called it "breathtaking — legally and politically."
"The court stated that the test for whether somebody is exempt from overtime should be more duties-focused than salary-focused," Lambert said.
Lambert said he expects the Department of Labor to appeal Mazzant's decision to the Fifth Circuit Court of Appeals, and ultimately expects the matter to land in the hands of the U.S. Supreme Court.
Outside the legal arena, the future of the overtime rule is also in flux, as President-elect Donald Trump and Republicans in Congress have vowed to reverse regulations they view as unfriendly to business.
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