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Overtime Rule Roadblock Under Appeal

Monday, December 5, 2016

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The future of a new overtime-pay rule that would have made overtime pay available to 4.2 million workers is uncertain due to a federal court ruling in Texas.

Originally set to take effect Thursday (Dec. 1), a federal judge ruled late last month to put a hold on the controversial rule.

Business groups and officials from 21 states sued the Obama Administration in the U.S. District Court of Eastern District of Texas, seeking to block and overturn the rule. They claimed the rule would place a heavy burden on their budgets and that the Labor Department overstepped its authority.

US Labor Dept
Ed Brown / Wikimedia Commons

The U.S. Department of Labor filed an appeal Thursday (Dec. 1) to the injunction issued.

U.S. District Judge Amos Mazzant III issued a preliminary injunction in the case Nov. 22, following a hearing on the request held Nov. 16.

In its review, the court determined that the business associations and states demonstrated a likelihood of success on the merits of their claim that the Labor Department exceeded its rule-making authority, and further satisfied all requirements to issue a nationwide injunction.

Appeal Filed

In response, the Labor Department filed an appeal Thursday to the U.S. Court of Appeals for the Fifth Circuit.

The Labor Department has long argued the rule stood on “sound legal and policy footing,” noting that the legal challenges were attempts to deprive workers of fair pay.

However, some say consideration of the appeal will likely not take place until after the Trump Administration takes office, which would mean the new administration would have the opportunity to review the rule’s merits.

Builders Respond

Construction is one of the major industries where the new rule will have the biggest impact, according to the Economic Policy Institute.

Yet, construction industry trade groups were not pleased with the "sweeping changes," arguing that the measure would backfire and hurt workers. In September, many trade groups, including the Associated Builders and Contractors, filed a legal challenge against the rule in the same court as the states. The court consolidated the two cases in October.

ABC Vice President of Legislative and Political Affairs Kristen Swearingen has applauded the court’s injunction in the matter.

plaster application
© / kadmy

The rule would have made overtime pay available to 4.2 million workers, including many in construction.

“Construction contractors are pleased that the court has stepped in to provide relief from another overreaching and burdensome regulation from the Department of Labor,” stated Swearingen. “By dramatically increasing the minimum salary threshold for exempt employees, the Department of Labor’s overtime rule would have taken workplace flexibility away from employees and may have required some employers to consider switching certain employees from salaried to hourly positions.”

She also noted that the rule would have “significant impact on commercial and industrial construction projects” as they often last longer than three years and are planned to stay on time and under budget.

“The injunction granted … will protect employers from being forced to speculate which of their employees may be considered non-exempt under a salary threshold that could change in the middle of a multiyear construction project.”

The Rule

Overtime protections require employers to pay one-and-a-half times an employee’s regular rate of pay for any work past 40 hours a week. The rule follows a March 13, 2014, Presidential Memorandum directing the Labor Department to update the overtime standards.

Most significantly, the final rule, which altered the altered the Fair Labor Standards Act, raised the salary threshold indicating overtime eligibility from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).

The rule also updated the total annual compensation level above which most white-collar workers will be ineligible for overtime, raising the level from the current $100,000 per year, to $134,004 per year.

Under the new rule, the salary thresholds would have automatically updated every three years, based on wage growth over time, which would help to increase predictability, according to officials. Those updates were set to begin Jan. 1, 2020.


Tagged categories: Department of Labor; Good Technical Practice; Government; Labor; Lawsuits; Regulations; Workers

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