A little more than a week before it was scheduled to take effect, a federal judge Tuesday blocked an Obama administration rule that would have extended overtime eligibility to 4 million Americans.
The Labor Department's overhaul of the overtime rule would require employers to pay time-and-a-half to salaried employees who work more than 40 hours in a given week and earn less than $47,476 a year.
That salary threshold is about twice the amount that currently allows workers to be exempted from overtime. Supporters of the rule called it long overdue as inflation took its toll on overtime protections.
The measure, set to take effect Dec. 1, was intended to send a jolt to slow-growing U.S. incomes.
Reuters said it was expected to touch nearly every sector of the U.S. economy and have the greatest impact on non-profit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold.
U.S. District Judge Amos Mazzant III in Sherman, Texas, sided with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, who complained that the new overtime rules would cause an uptick in government costs in their states and require businesses to pay millions in additional salary. Business groups said the new rule changes would have eventually led to layoffs.
The Fair Labor Standards Act says employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule “creates essentially a de facto salary-only test,” Mazzant said in his ruling.
Nevada Attorney General Adam Paul Laxalt said in a statement that the ruling "reinforces the importance of the rule of law and constitutional government."
The timing of the ruling provides an early answer for workers who wondered about the rule's fate after the presidential election victory of Donald Trump, according to National Public Radio.
"In any presidential transition, previous policies are subject to review,” NPR said. “Trump has pledged to undo President Obama's executive orders, dismantle the Affordable Care Act, reverse policies on clean air, immigration and on Dodd-Frank financial reform. This [month], the Congressional Budget Office said canceling the overtime rule would reduce employers' compliance costs and boost profits, a point advocates refute. This leaves businesses wondering how they should proceed on rules that might be unwound."
With Republicans controlling both houses of Congress and a Trump administration set to take office in less than two months, the new overtime rule's long-term future remains in limbo.
The federal Department of Labor issued a statement about the court's preliminary injunction:
"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 department's overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options."