In this significant ruling which will affect the lives of almost every salaried class in most sectors of the U.S. economy, the Obama appointed judge has ruled that overtime payments to workers cannot be created based on salary levels alone. The Labour Department is weighing its options.
In a body blow to one of Obama’s signature achievements, a federal judge has blocked the mandatory payment of overtime to 4 million salaried workers from taking effect.
In Sherman Texas, through his ruling U.S. District Judge Amos Mazzant agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, the rule defining the mandatory payment of overtime wages to workers is unlawful. He has allowed a motion for a nationwide injunction.
The rule would have taken effect from Dec 1. It essentially would have doubled the salaries of 4 million workers to an individual ceiling of $47,500 for mandatory overtime pay. If it would have been implemented, it would have been the first significant change in four decades.
Its impact would have been felt in virtually every sector of the U.S. economy. Its greatest impact would have been on retail companies, NPOs, restaurants, hotels, and management workers whose salaries are below the new threshold.
According to the 21 states and the business groups, who are all party to the lawsuit, the new rule is too drastic and the salary threshold, arbitrary.
Mazzant, who incidentally was appointed by President Barrack Obama, ruled that the federal law governing overtime does not fall within the purview of the Labour Department; the department is not competent to decide on overtime payments based on salary levels alone.
The Fair Labour Standards Act exempts employees from overtime if they perform administrative, executive, or professional duties. However, in Mazzant’s interpretation, the rule “creates essentially a de facto salary-only test,”.
As per Jason Surbey, the spokesman for the Labour Department, the Labor Department is currently considering its options. It is confident that the entire rule is legal.
Although the Labour Department can appeal to the 5th U.S. Circuit Court of Appeals, in New Orleans, Louisiana, in the past the court has stymied many of Obama’s executive actions, including on immigration.
There is the very real possibility of the Labour Department dropping the case once Republican President-elect Donald Trump takes office in January 20.
The case is Nevada v. U.S. Department of Labour, U.S. District Court for the Eastern District of Texas, No. 16-cv-731.