Court blocks federal plan to extend overtime pay to many salaried workers

On Tuesday, Nov. 22, the U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction blocking the start of a rule that would have made an estimated four million more American workers eligible for overtime pay, throwing a monkey-wrench into the Obama administration’s labor-law plans.

According to an Associated Press report by Michelle Rindels, the result of last Tuesday’s ruling is that overtime changes set to take effect on Dec. 1 are now “unlikely to be in play before vast power shifts to a Donald Trump administration, which has spoken out against Obama-backed government regulation and generally aligns with the business groups that stridently opposed the overtime rule.”

“Businesses and state and local governments across the country can breathe a sigh of relief now that this rule has been halted,” said Nevada Attorney General Adam Laxalt, who led the coalition of 21 states and governors fighting the rule and has been a frequent critic of what he characterized as Obama administration overreach. “Today’s preliminary injunction reinforces the importance of the rule of law and constitutional government.”

The regulation sought to shrink the so-called “white collar exemption” that allows employers to skip overtime pay for salaried administrative or professional workers who make more than about $23,660 annually, the AP report explained. “Critics say it’s wrong that some retail and restaurant chains pay low-level managers as little as $25,000 a year and no overtime, even when they work 60 hours a week,” said the AP.

Under the revised rule, those workers would have been eligible for overtime pay as long as they made less than about $47,500 a year, and the threshold would readjust every three years to reflect changes in average wages. The U.S. Department of Labor (DOL) said it’s now considering all its legal options.

SPI: The Plastics Industry Trade Association released a statement hailing the preliminary injunction preventing the DOL from implementing the sweeping changes to federal overtime rules. SPI has worked to support legislation that raised awareness and brought momentum to efforts to exhaust all options to stop the rule. In the near term, it is possible that DOL will appeal the decision, but it is anticipated that the incoming administration will take steps to have the rule withdrawn, said the SPI in its statement.

“Government works best when we can work together to find solutions that help workers without putting their livelihoods at risk by overburdening companies,” said SPI President & CEO William R. Carteaux. “The DOL’s overtime rule would’ve harmed both plastics companies and their employees by imposing unnecessary administrative burdens and dramatic increases in operating costs. SPI applauds the court’s decision to block implementation of that rule, and looks forward to working collaboratively with Congress and the next administration to enact pro-manufacturing policies that benefit both businesses and American families.”

Opponents of the rule claimed it would increase compliance costs for employers who would have to track hours more meticulously and would force companies to cut employees’ base pay to compensate for overtime costs that kick in more frequently, said the AP report.

Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council, commented, “This overtime rule is totally disconnected from reality. The one-size-fits-all doubling of the salary threshold demonstrated ignorance regarding the vast differences in the cost-of-living across America.”

The court agreed with plaintiffs that the rule could do irreparable harm if it wasn’t stopped before it was scheduled to take effect this week. However, the Department of Labor could appeal the ruling, which might end up in front of a Supreme Court that includes some Trump appointees, said the AP.

In the manufacturing sector, management often compensates salaried employees who put in additional hours by giving those employees discretionary time off. Many salaried employees also receive bonuses and profit sharing at various times throughout the year, which the Obama administration most likely did not take into account when arbitrarily creating the new rule.