HR Update - Court Blocks New Overtime Rules

New overtime and worker classification rules set to take effect on December 1 have been blocked by a federal judge. The new rules would have extended overtime pay to millions of Americans who are currently exempt, in most cases because they are considered management.

On Tuesday evening, U.S. District Judge Amos Mazzant held that the rule is unlawful. The case had been brought by 21 states and several business groups, including the National Retail Federation and the U.S. Chamber of Commerce. Mazzant was appointed to the U.S. District Court for the Eastern District of Texas by President Obama.

The new overtime regulations, as part of the Fair Labor Standards Act, would have increased the salary threshold from $455 per week ($23,660 for an employee who works for an entire year) to $913 per week ($47,476 per year) for the executive, administrative, and professional (white collar) exemptions. The final rule also increased the annual compensation for the Highly Compensated Employee exemption from $100,000 to $134,004, while also establishing a mechanism to update all salary and compensation levels every three years beginning in 2020.

In blocking implementation of the rule, Judge Mazzant said that the Labor Department cannot use only salary levels to determine if workers are eligible for overtime. He said that the rule “creates essentially a de facto salary-only test,” Mazzant wrote in the 20-page ruling."

The Labor Department is expected to appeal the ruling, but President-Elect Trump, when he takes office, could direct the Department to drop any such appeal.