The overtime rule enacted via executive order by President Obama likely won’t see the light of day. The new rule could have put many small businesses and startups in difficulty by widely increasing the number of employees covered by the overtime regulation. Days before the rule was supposed to go into effect, a federal court froze its implementation. Now, the Trump Administration filed a request to extend the time to file a reply brief and is likely to consent to the injunction.
The Impact of the Overtime Rule
The overtime rule would have made 4.2 million salaried workers eligible for overtime pay by immediately doubling the threshold at which workers are exempt from overtime, to $47,476 from $23,660. Any employee earning $47,476 or less would have been entitled to payment for overtime unless subject to one of the “white collar” exemptions.
Complying with this new rule would have been especially tough for small businesses and startups because they have less resources to handle an uptick in wages and the increased compliance duties that go along with it.
Many employers complained that it will drive up their costs and cause them to cut workers’ hours, slow hiring of full-time staff and turn salaried workers into hourly employees.
The Court’s Decision to Block the Overtime Rule
Small businesses and startups are not the only group to be affected by the overtime rule. State and local governments would have been bound by the rule too.
21 states and a coalition of more than 50 businesses filed separate lawsuits against the U.S. Department of Labor to block the regulation. The states alleged that this new rule will “wreck State budgets” by mandating the wages state employees are paid, what hours these employees will work, what compensation will be provided to employees working overtime, and the overall structure of payment at the State level.
The Texas federal court ruled that “this significant increase to the salary level creates essentially a de facto salary-only test” which is contrary to the statute promulgated by Congress (the Fair Labor Standards Act) and proceeded to grant a preliminary injunction blocking the implementation of the overtime rule.
Extension Request Filed by The Trump Administration
The Obama Administration left office before the court made a decision on appeal. President Trump’s Justice Department recently requested a 30-day extension to “allow incoming leadership personnel adequate time to consider the issues.”
Ultimately, President Obama’s overtime rule will be scrapped in all likelihood. The Trump administration issued a memorandum freeing all federal regulations that haven’t gone into effect, including this one. Additionally, Trump’s pick to head the Labor Department, Andrew Puzder, has been highly opposed to raising the minimum wage and has specifically argued against this very overtime rule. Not to mention that this preliminary injunction itself is a death sentence of sort.
