Just before the Thanksgiving holiday, the U.S. District Court for the Eastern District of Texas blocked the U.S. Department of Labor's overtime rule. Judge Amos Mazzant halted the regulation temporarily as he reviews the law.
"Due to the approaching effective date of the Final Rule, the Court's ability to render a meaningful decision on the merits is in jeopardy," Judge Mazzant wrote in a 20-page order. "A preliminary injunction preserves the status quo while the Court determines the department's authority to make the Final Rule as well as the Final Rule's validity."
A Texas District Court has stalled the DOL's overtime regulation.Previous action
The overtime rule, which was scheduled to take effect on Dec. 1, 2016, was challenged from the moment it was proposed. The rule nearly double the salary threshold, making more than 4 million workers eligible for additional compensation.
The new regulation would enable employees making less than $913 per week or $47,476 per year to qualify for overtime pay. The former guideline was $455 per week or $23,660 per year.
On September 20 of this year, 21 states and more than 50 business groups filed a suit against the DOL, claiming the action was an overstep by the federal government, according to The Washington Post. To ensure the case moved quickly, the suit was filed in the Eastern District of Texas, known as a "rocket docket" for its efficiency. The goal was to delay the effective date, an outcome that has now become a reality.
The Texas suit wasn't the only counter to the overtime bill, however. The House of Representatives passed a bill on Sept. 28, 2016 that would push the effective date to June 1, 2017. This regulation would still have to be approved by the Senate before making its way to President Obama's desk. The White House previously issued a Statement of Administration Policy stating the president's vow to veto the bill if it came his way.
With the recent overtime stall due to the Texas court suit, the House of Representative's bill looks to be temporarily moot – at least until an agreement is reached.
The impact on small businesses
While the overtime rule would extend overtime pay to nearly 4 million American workers, small businesses across the country worried about what the regulation would do to their bottom line.
The National Federation of Independent Business, which claimed that 44 percent of organizations employed at least one person eligible for overtime pay, applauded the Texas District Court's decision to pause the regulation. The NFIB called the outcome a victory, as many small companies would not have been ready for the change by Dec. 1.
"President-elect Donald Trump could make the final decision regarding the overtime law."
Looking to the future
The overtime rule was one of President Obama's top regulatory initiatives. He aimed to have the law go into effect before the end of his second term and ahead of the inauguration of president-elect, Donald Trump.
Now that the regulation is on hold, chances are slim that the debate will be solved before January 20.
The overtime rule could be eliminated completely once Trump enters the presidency. Throughout the course of his campaign, the businessman talked about rolling back regulations he believes are hurting the economy that President Obama has put into place, according to The Hill. Only time will tell what will happen to the proposed law.
Next steps for employers
Previously, Triton Benefits and HR Solutions told companies to prepare for the inevitability of a Dec. 1 effective date for the overtime rule, despite the Texas lawsuit and House bill. Yet, now that the deadline has been stalled, businesses can go back to operating as usual – with caution.
While the delay and a new president may cause the overtime rule to be scrapped altogether, it could also result in alterations to what President Obama has planned. Potential changes could include moving the effective date to later on in 2017 as well as reducing the salary cap the Obama administration wanted.
Check back for future updates as well as consultative advice for how your organization can prepare for any upcoming regulatory changes.