Court Says No to Extending Overtime Pay to 4M Americans

Court Says No to Extending Overtime Pay to 4M Americans

A federal court blocked a Labor Department plan to extend overtime pay to millions of salaried U.S. workers. Under the new plan, Obama administration wanted overtime charges to come into effect Dec. 1.

It is highly unlikely, though, the rule will benefit workers this holiday season. And the fate of the changes remains unclear under a Trump administration. The brash billionaire vowed to undo 70 percent of federal regulations if he reached the White House. What’s more, it is highly unlikely for a president that favors business groups and runs many businesses to pass the rule.

The Ruling

The U.S. District Court in the Eastern District of Texas issued an injunction for the Department of Labor’s rule this week. The court argued that the department exceeded its authority. Nevada Attorney General Adam Laxalt commented on the developments.

He said businesses and local governments alike should “breathe a sigh of relief” now. Laxalt started the battle against the new rule and led 21 states opposing it in court. In his view, the new legislation is another example of government overreach. He praised the ruling saying that it reinforced the rule of law across the country.

Nevertheless, the new rule targeted the disastrous “white collar exemption” which enables employers to not give overtime pay to salaried workers that earn over $23,660 per year. The exemption includes employees in both public and private sectors.

Critics of the exemption think it is unfair for businesses to deprive low-level managers of overtime pay when the salary is $25,000 a year. Some of these people work as much as 60 hours per week.

The new rule tried to raise the cap for these workers and make them eligible for overtime pay as long as they earn less than $47,500 per year. The federal government pledged to adjust the limit every three years depending on fluctuations in average wages levels.


Department of Labor experts said the new rule would make the Fair Labor Standards Act more effective. Experts noted that inflation eroded the act. In 1975, overtime protections benefited 62 percent of salaried workers in America. Today, just 7 percent of U.S. salaried workforce has the protections.

The federal agency pledged to reconsider its legal options. In a written statement, the department said it “strongly” disagreed with the ruling since it delays “a fair day’s pay for a long day’s work” for about 4 million Americans. The agency explained the new rule is completely legal as it is the result of a comprehensive rule making process. The current administration thinks labor laws are outdated.

Critics, on the other hand, argued that the rule would needlessly boost labor costs for employers. As a result, many businesses would slash base pay to compensate for overtime pay within the company. Opponents think the new rule is a one-size-fits-all since the Obama administration failed to reflect the real cost-of-living across America. The court agrees the rule could become a burden to businesses if it isn’t stopped in time.

The Labor Department may appeal the ruling and the case could reach the Supreme Court.

Image Source: Flickr