A federal judge on Tuesday blocked a new rule making make millions more Americans eligible for overtime pay, indefinitely pushing back the December 1 effective date while he weighs a challenge to the requirement.
The decision by U.S. District Judge Amos Mazzant in the Eastern District of Texas to grant a preliminary injunction affects an estimated 4.2 million workers who were to be newly eligible for time-and-a-half wages for each hour they put in beyond 40 a week.
The rule, released by the Labor Department in May, would nearly double the threshold at which executive, administrative and professional employees are exempt from overtime to $47,476 from $23,660.
Twenty-one states challenged the overtime expansion, arguing that Congress never intended to set any salary threshold for the exemptions or to allow the threshold to be raised every three years, as the Labor Department’s rule specifies.
“This is a victory for small business owners and should give them some breathing room until the case can be properly adjudicated,” said Juanita Duggan, CEO of the National Federation of Independent Business, which is separately challenging the requirement.
Small business and other trade groups have argued the overtime rule would swell labor costs and force employers to demote managers to hourly employees, hurting morale, among other hassles.
But Christine Owens, head of the National Employment Law Project, a worker advocacy group, said, “Unfortunately, for the time being, workers will continue to work longer hours for less pay thanks to this obstructionist litigation."
Labor Department officials and worker advocacy groups said the rule would help ensure managers and administrative employees are fairly paid for the extra hours they log and narrow a growing divide between wealthy and low- to middle income households.
In recent months, thousands of restaurants, retailers and other businesses have reshuffled their staffs to accommodate the regulation. Some raised employee salaries to the new threshold to avoid the overtime costs. Others were expected to convert salaried employees to hourly workers, in some cases cutting their base pay to offset the overtime expense.