US court temporarily bars overtime pay expansion

Posted on November 23, 2016

A Texas district court has temporarily blocked the expansion of overtime pay for the US workforce, threatening to dismantle another key landmark of Barack Obama’s legacy.

From December 1 an additional 4m US workers were set to receive federally mandated overtime payment from employers, with 1.5 times their hourly payment for every additional hour worked over 40 hours a week.

While US workers earning an annual salary of less than $23,600 are already mandated to receive overtime payment, the new Department of Labor regulation would have expanded the pool of eligible workers to those earning up to $47,476 annually — a move the Obama administration claimed would help ease the burden on the middle-class worker.

Texas US District Judge Amos Mazzant said he had issued a temporary injunction against the regulation so the court could have additional time to determine its validity.

The injunction comes as President-elect Donald Trump has vowed to roll back some of Mr Obama’s signature policy measures, including the Obamacare healthcare programme.

In a YouTube video address this week, Mr Trump vowed to cut back on red tape in Washington, promising to get rid of two regulatory measures for every new regulation he introduced.

During the presidential campaign he walked back his stance on the minimum wage, initially saying in a Republican primary debate that American wages were “too high” — he later said decisions on minimum wages should be left to the states, and then that he would raise the federal minimum wage to $10 if elected. 

The decision to expand overtime pay had been criticised by several US business groups, including the Chamber of Commerce, the trade organisation which represents more than 3m businesses and which filed the legal challenge against the Department of Labor in September.

On Tuesday the chamber hailed the temporary injunction as “a great result”.

“We are very pleased that the court agreed with our arguments that the Obama administration’s new overtime rule was unlawful,” said Randy Johnson, the chamber’s senior vice-president of labour, immigration and employee benefits. 

“If the overtime rule had taken effect, it would have resulted in significant new costs — more than $1bn according to the Congressional Budget Office — and it would have caused many disruptions in how work gets done. Furthermore, the rule would have reduced workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The National Association of Federal Credit Unions also welcomed the result. 

“This is a welcome delay for many small businesses, especially credit unions, that would not have been able to integrate this immense increase without impact on the services they provide,” Carrie Hunt, the association’s vice-president of government affairs, said in a statement.

“NAFCU and our members believe that this rule would have created major unintended consequences and obstructed growth opportunities for many white-collar workers. Ultimately, in its current form, this rule could hurt the people it was trying to help.”

Carl Tobias, a professor of law at the University of Richmond, said that while this was a preliminary injunction, and the Obama administration could appeal, there was not much time left before the Trump administration took office.

“The timing is such that it may be very difficult … for the Obama administration to have the rule go into effect,” he said.

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