SHERMAN, Texas -- A federal judge from the U.S. District Court for the Eastern District of Texas placed an injunction Nov. 22 on an effort by the U.S. Labor Department to raise the threshold of white collar workers qualifying for overtime, a ruling that is not arbitrary despite the court's findings, says one expert.
Ever since 1972, when 62 percent of workers received overtime, that number has been shrinking and currently stands at 7 percent of eligible employees.
Earlier this year President Obama approved a Labor Department addendum to the Fair Labor Standards Act (1938) in which employers would be required to pay overtime for those workers who were not engaged in executive, administrative or professional duties and were making up to $913 a week, nearly doubling the prior cap of $455 a week. Based on those numbers, around 4.2 million workers were anticipating a financial boost Dec. 1, when the law was to go into effect.
The decision by Obama-appointed federal judge Amos Mazzant comes after 21 states, the U.S. Chamber of Commerce and a number of businesses petitioned the court to overturn what they termed an unlawful rule. The plaintiffs alleged the dramatic increase in the salary threshold was arbitrary, since it targeted a select and narrowly defined group of workers and, according to federal law, and the Labor Department lacks the power to determine overtime when the decision is based solely on salary levels.
Distinguished professor and Sidney Reitman Scholar Alan Hyde of Rutgers Law School told the Southeast Texas Record, “It is not correct the court found the rule arbitrary because it applied to a specific group of plaintiffs. In fact, it is the opposite of true. [If] the district court said that the Department of Labor has no power to set overtime rules that apply across the board to all workers [but it] has power to make rules only to define categories like executive, administrative, and professional.”
Hyde said it appears the exemption of those three categories would support the rule.
Texas Attorney General Ken Paxton called the Labor Department’s actions bureaucratic overreach and, in conjunction with Nevada Attorney General Adam Paul, brought the case to the court on behalf of the other states.
Michael Green, a professor of law at Texas A&M University, concurred with the plaintiff’s view of overreach.
“The issue in this case is whether the [Obama] administration was doing something that exceeded the law,” Green said. "[The Labor Department, in general, has a good heart."
Other factors involved were the enormous financial impact the ruling was set to have on employers and the timing of the recent court decision. According to the Labor Department’s own research, the new rule would cost employers an additional $1.2 billion in overtime pay, with the rule requiring an additional $20 billion for employers to set up monitoring systems to comply with the law.
The fact that the court’s decision came so late in the year and so close to the Dec. 1 start-up time has also been a bane on businesses. Green noted the timing was “causing distress because a lot of businesses had put procedures in motion [that cost money and time]."
The Labor Department has condemned the court ruling and can appeal the decision to the Louisiana-based Fifth Circuit Court of Appeals. Doing so, however, may not be advantageous to the government. According to Reuters, the Fifth Circuit has ruled against Obama’s initiatives in the past.
Then there is the realization that even if the case goes through an appeals process, either the incoming administration of President-elect Donald Trump, who has viewed the rule unfavorably, could do away with the law or Congress may give it a legislative death.