Court Blocks Obama's Overtime Pay Rule From Taking Effect

A Texas judge blocked President Barack Obama's bid to expand overtime pay protections to millions of Americans on Tuesday, thwarting a key presidential priority just days before it was to take effect.

By Michael A. Memoli

A Texas judge blocked President Barack Obama's bid to expand overtime pay protections to millions of Americans on Tuesday, thwarting a key presidential priority just days before it was to take effect.

The Labor Department rule doubles the salary level at which hourly workers must be paid extra for overtime pay, applying the requirement to anyone making up to $47,476 annually. U.S. District Court Judge Amos L. Mazzant III sided with Nevada and 20 other states in their bid to halt the rule, and he incorporated a similar legal challenge from a coalition of business groups including the Chamber of Commerce into his ruling.

The ruling also dealt a late blow to Obama's effort to build a legacy based largely on his use of executive power.

He moved without Congress on climate, immigration and foreign policy, gambling that his successor would preserve his actions. Donald Trump's election all but guaranteed that much of Obama's work will be undone.

Much of the legal opposition to Obama took root in Texas; the state has sued the administration more than 45 times and its attorney general co-led the overtime lawsuit.

The overtime rule, finalized in May, represented the first such increase in more than a decade.

It was hailed at the time as the most consequential action the Obama administration could take for middle-class workers without congressional involvement.

Plaintiffs, though, argued the Labor Department acted beyond its authority under the Fair Labor Standards Act, which was the basis for the change.

Mazzant agreed, saying that the department has leeway to define which employees are eligible for overtime pay based on the duties they perform, but not the salary level.

"The department's role is to carry out Congress' intent," he wrote in a 20-page opinion. "If Congress intended the salary requirement to supplant the duties test, then Congress, and not the department, should make that change."

The administration had said more than 4 million salaried workers stood to benefit from the change when it was to take effect Dec. 1.

It said when it published the final rule that it had incorporated the feedback of both labor interests and industries that stood to be most affected by the change, and had backed off an even higher salary threshold after a public comment period.

Retail and fast-food businesses especially had warned the move would backfire, by leading employers to slash workers' hours.

But supporters, including Democrats in Congress, predicted that employers would either raise employee salaries or hire more part- and full-time workers to prevent having to pay a higher hourly rate.

The Labor Department said it was considering its legal options, including an appeal of the ruling.

"The department's overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule," it said.

It was not immediately clear whether the administration could petition to stay the preliminary order and allow the rule to go ahead as planned.

GOP lawmakers and their allies in the business community celebrated the decision.

"The decision brings us a step closer to curbing regulations that have resulted in $80 billion in compliance costs and more than 25 million hours of paperwork," said Linda Kelly, senior vice president for the National Association of Manufacturers.

Supporters of the administration's action cast the decision as temporary. Christine Owens, executive director of the National Employment Law Project, said opponents "will not ultimately prevail in their attempt to take away a long-overdue pay raise for America's workers."

But the rule was already in jeopardy after the election of Donald Trump. Just as the Obama administration effected the change through its rule-making prerogatives, a Republican president can undo it.

"The fights are not yet over _ and our work is just beginning," Kelly said.

(c)2016 Tribune Co.

Caroline Cournoyer is GOVERNING's senior web editor.