Global Tax Insights
Judge Blocks Obama Overtime Pay ExtensionNovember 23, 2016
A federal judge has blocked the overtime pay extension set to take effect December 1st—Find out why he challenged the DOL’s ruling.
The overtime pay rules set to take effect December 1st have hit a road block, quite literally—Tuesday November 22nd a federal judge blocked the rule, saying the change is “unlawful”.
What does it mean to “block” a rule?
To “block” a rule in U.S. Government means to halt the enforcement of the rule until the government can win a countermanding order from an appeals court.
More about the overtime “block”
On Tuesday, U.S. District Judge Amos Mazzant (Texas) agreed with 21 states and 50 business groups (including the U.S. Chamber of Commerce) that the overtime pay extension is unlawful.
As a refresher, under the rule issued by the Department of Labor (DOL), those who meet the administrative, professional and executive exemptions under the duties test (which has not changed) and earn at least $913 per week, or $47,476 annually would now be eligible for the overtime exemption. Currently, the exemption applies to those earning $455 per week, and $23,600 annually. Take a look at our blog for more info.
Why some felt the change was unlawful
In a 20 page ruling, Judge Mazzant ruled that the federal law governing overtime was simply “unlawful”.
Mazzant was not alone—21 states and 50 business groups applauded the decision, because...
- The rule could lead to job losses
- The rule could force employers to demote managers to hourly workers (which would hurt morale)
- The rule could lead to financial burdens for many small businesses
- The rule ignores the duties test as a deciding factor in granting overtime pay
How does the Department of Labor feel?
The DOL expected the change to have the greatest impact on nonprofits, retail establishments, hotels and restaurants, since many businesses in these industries employ management workers and pay them a salary below the new threshold.
Others, siding with the DOL, have called the decision “extreme” because....
- More than 4 million salaried workers would have been impacted from the Dec. 1st change.
- Thousands of businesses have realigned their staff in recent months to accommodate the regulation.
- It is a disappointment to millions of workers who have to work long hours with no extra compensation.
- It ignores those Americans and lawmakers who are devoted to raising wages.
At this point, it is difficult to say whether or not the overtime pay extension stands a chance to survive the legal challenge. Stay tuned for updates. In the meantime, messaging to employees impacted by the uncertainty will be key in maintaining a good working relationship.
Questions? Contact us.