Obama White-Collar Overtime Pay Mandate Blocked by Judge

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President Barack Obama speaks on Sept. 17, 2016, in Washington.

Photographer: Olivier Douliery-Pool/Getty Images
  • Change would have required overtime pay for more employees
  • States win order blocking rule they said would stymy growth

An Obama administration policy that would have given more white-collar workers overtime starting Dec. 1 was blocked nationwide by a federal judge in Texas.

The decision Tuesday is a victory for 21 states and dozens of business groups that sued, complaining the new rule would increase government costs in their states by $115 million next year alone and would put private employers on the hook for millions of dollars more, possibly leading to layoffs.

It’s the fourth time in 21 months that a federal judge in Texas has issued a nationwide injunction blocking one of President Barack Obama’s executive orders. Other stalled Obama initiatives involve shielding undocumented immigrants from deportation, mandating bathroom access for transgender students, and requiring labor-violation disclosures by federal contractors.

The rule would have doubled the maximum salary cap to $47,892 a year for full-time executive, administrative and professional workers to be exempt from overtime pay requirements. The higher cutoff, along with a provision to periodically increase it, would have extended overtime protections to millions of full-time salaried workers, just 7 percent of whom are currently protected by the Fair Labor Standards Act compared with 62 percent in 1975, according to the government.

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.

Congress’s Intent

By requiring employers to pay overtime wages based on salary rather than an employee’s duties, the Labor Department exceeded its authority under the Fair Labor Standards Act and ignored Congress’s intent, Mazzant said in his ruling. “If Congress intended the salary requirement to supplant the duties test, then Congress and not the department should make that change,” he said.

“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," the Labor Department said in a statement. "The department’s overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”

The U.S. Labor Department failed to consider regional salary and economic differences in setting the nationwide base pay rate, opponents said in challenging the new rule. They also complained the Obama administration disregarded the abilities of smaller public and private employers to pay higher salaries that would automatically ratchet up every three years.

The arguments by both sides turned partly on rule-making requirements under federal law.

Republican Governors

The states -- all of them except Louisiana headed by Republican governors -- claim the Obama administration usurped Congress’s exclusive authority to set minimum wages and ignored the requirement to allow public comment before the statutory salary level automatically indexes every three years.

Labor Department officials said they followed all federal rule-making procedures, evaluating more than 270,000 public comments before finalizing the change.

Justice Department lawyers had asked Mazzant to at least let the new rule take effect in the 29 states that didn’t sue, to update salary triggers that haven’t changed since 2004. Rising wages and broad workplace definitions of what constitutes white-collar jobs have “left employees who should not be exempt without overtime protection,” the government said in court filings.

The case is Nevada v U.S. Department of Labor, 16-00731, U.S. District Court, Eastern District of Texas (Sherman).

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