Federal judge blocks new federal overtime pay plan

A federal court judge has blocked the start of a new U.S. Department of Labor overtime rule that would have made 4.2 million American workers eligible for overtime pay. North Dakota would have been one of the most affected states.

The rule would have more than doubled the annual salary employees, mainly with managerial or supervisory positions, need to earn to potentially be exempted from overtime. The maximum threshold for overtime eligibility was to be raised from $23,660 a year or $455 per week to $47,476 a year or $913 a week. The rule sought to redefine those employees eligible for overtime pay based upon salary received, rather than duties performed.

The new law was an executive order signed by President Barack Obama and one of his signature policies. It never went before Congress for its consideration.

On Tuesday, U.S. District Judge Amos Mazzant of the Eastern District of Texas, who was appointed by Obama, granted the nationwide preliminary injunction, saying the Department of Labor’s rule was unlawful and exceeds the authority the agency was delegated by Congress.

“Once again, an Obama-appointed judge has blocked the president from imposing an unconstitutional one-size-fits-all regulation on employers and workers,” said Congressman Kevin Cramer, in a statement released last week.

“This rule would inflict a significant regulatory burden on small businesses, nonprofits and local governments and result in fewer opportunities for job training, talent development, and managerial experience for employees. It also stifles upward mobility for employees. Any changes to federal labor policy should respect congressional intent and include sufficient input from all affected stakeholders. Clearly this one does not,” Cramer said.

Cramer has consistently opposed the rule change, signing two separate letters, one to Department of Labor Secretary Thomas Perez and the other to the Labor, Health and Human Services, and Education Appropriations Subcommittee requesting it block the rule in its appropriations bill. The full committee approved the appropriations bill in July with this provision included. He also cosponsored House Joint Resolution 95, blocking the rule from taking effect.

In information provided to the Minot Daily News prior to the ruling Tuesday to block the Department of Labor’s overtime rule, Trinity Health, the largest employer in Minot, was preparing for the rule by evaluating how the Department of Labor’s Final Rule would impact that organization. A number of staff would have been affected by the new definitions for who might be classified as non-exempt versus exempt in executive, administrative and professional job categories. Trinity officials were making adjustments to some job categories, adjustments to schedules of some employees, and in some cases adjustments to wages to allow employees and the organization the ability to balance how services could be delivered and the cost of delivering that service, Trinity officials said. They did not anticipate any reduction in staff as a result of the change that would have become effective as of Dec. 1.

Implementation of the overtime rule now is on hold at Trinity Health.

Minot State University, another large employer in Minot, has been monitoring the Fair Labor Standard Act for several months and preparing to take the necessary steps addressing the new overtime regulations, MSU officials said. Based on a federal judge’s decision in Texas this past week granting a temporary injunction, the new overtime rules will not go into effect as scheduled for Dec. 1. Minot State will continue to monitor the situation as it works its way through the court system, MSU officials said.

Employees classified as salaried employees have flexibility in scheduling work hours but by being reclassified as hourly employees, they would have to keep track of their hours and make sure to only work 40 hours a week.

Companies had some alternatives to avoid the mandate including:

– Raising the salaries of salaried employees so they are above the new figures and avoid paying overtime.

– Reclassifying salaried employees as hourly employees and requiring those employees to work only 40 hours a week.

For those companies who planned to reclassify salaried employees as hourly employees, the change was expected to impact those who remained salaried employees who would have to pick up the slack – do more work and likely work longer hours.

The Obama Administration and Labor Department touted the new law as a raise for the middle class and part of the administration’s effort to promote “economic equality.”

A number of lawmakers, states and organizations said the new rule would have serious consequences not only for employees but for companies, including fewer work hours per week, higher employee compliance costs and lack of scheduling flexibility.

The U.S. Chamber of Commerce with a coalition of more than 50 private groups, plus a coalition of 21 states took the Department of Labor to court with lawsuits filed in September opposing the new rule.

“The DOL went too far in the new overtime regulation,” Randy Johnson, senior vice president of Labor, Immigration and Employee Benefits for the U.S. Chamber, said in a news release. “We have heard from our members, small businesses, nonprofits and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done. Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried processional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

A coalition of 21 states also filed a challenge at the same time reinforcing the range of entities who would have severe problems complying with the regulation. Nevada Attorney General Adam Laxalt and Texas Attorney General Ken Paxton, who was born in Minot, led the effort to block the new overtime rule by filing the lawsuit on Oct. 12 on behalf of the 21 states.

North Dakota was not one of the coalition of 21 states challenging the ruling. North Dakota Attorney General Wayne Stenehjem said they decided to monitor it and would join later as friend of the court.

Friend of the court is a party or an organization interested in an issue that files a brief or participates in the argument in a case in which that party or organization is not one of the litigants.

The Department of Labor said, in a statement, that it strongly disagrees with the court’s decision and it’s now considering all its legal options, The Associated Press reported. The news agency said the Labor Department could appeal the Tuesday ruling, which might end up at a Supreme Court that includes some appointees of Donald Trump who will become president in January.

Trump told the news site Circa in August that he would love to see a delay or carve-out for small businesses in the overtime regulation. Republican House Speaker Paul Ryan was more vocal against it, saying it would be an “absolute disaster” for the economy and was being rushed through by Obama to boost his political legacy, The Associated Press reported.