Federal courts block Obama’s expansion of overtime pay rule
A federal judge has issued a nationwide preliminary injunction to President Barack Obama’s overhaul of the Fair Labor Standards Act, which would have created new standards for overtime pay.
The Department of Labor claims that in its first year of existence, Obama’s plan, referred to as the Final Rule, would have extended overtime eligibility to 4.2 million U.S. workers, including 278,000 in the state of New York.
Obama’s proposal, which was set to go into effect on Dec. 1, was introduced as a move to boost the earnings for working families. However, the preliminary injunction postponed that date indefinitely.
“The Department strongly disagrees with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” a statement on the Department’s website states. “Final Rule is the result of a comprehensive inclusive rule-making process, and we remain confident in the legality of all aspects of the rule.”
According to the court’s summary of the case in 2014, Obama asked his secretary of labor to update the Fair Labor Standards Act so that it would match the needs of modern workers. Two years later, in May 2016, the Department of Labor made the proposal public with the intent of getting the public’s opinion on the proposed amendments. Roughly a week after the document was made public, the Department received 293,000 comments. The final version of the proposal, referred to as the Final Plan, was released on May 23, 2016.
The summary goes on to explain that the Final Rule would have increased the minimum salary level for employees exempt from overtime pay from $445 per week, or $23,660 annually, to $913 per week, or $47,476 annually.
This number, the summary explains, “is based up the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage region of the country, which is currently the South. The Final Rule also establishes the automatic mechanism that adjusts the minimum salary level every three years. The first automatic release [would] occur on Jan. 1, 2020.”
A video posted on the Department of Labor’s website explains that, under the Final Plan, employers of workers who qualify for overtime pay could also choose to raise their workers’ wage so that they would earn more than the proposed threshold.
Expanding overtime pay would contribute an additional $1.2 billion in wages annually, a statement released by the White House’s press office claims. Contrary to the Department of Labor’s estimates, the Economic Policy Institute estimated that 12.5 million workers would benefit from the Final Plan, including 4.9 million workers who will be eligible for overtime protection for the first time.
In a testimony before the U.S. House of Representatives Committee on Small Business Subcommittee on Investigations, Oversight, and Regulations, Ross Eisenbrey, the vice president of EPI, expressed his belief that the amendment of overtime laws could help employees balance their work with family life.
“Work-life balance is precisely what the Fair Labor Standards Act is about,” Eisenbrey said. “Because of its requirements to pay many employees a premium for time worked beyond 40 hours a week, the FLSA is the single most important family-friendly law ever passed in the United States.”
Earlier this year, New York City Comptroller Scott M. Stringer released a report in which he examined the potential changes that the Final Plan could bring about.
In summary, the report stated that roughly 370,000 workers in New York City would be affected by the threshold increase and of that number, 110,000 workers would gain overtime eligibility for the first time. Of the 370,000 who would benefit, 61,000 are women and 52,000 are part of minority groups.
The remaining 260,000 would see their overtime protection strengthened. As the document explains, some employers were able to avoid paying overtime by classifying employees as administrative, executive or professional, which made them ineligible for overtime pay. The Final Plan made it more difficult for employers to misclassify their employees.
“Much like raising the minimum wage to $15 an hour, raising the overtime threshold will put more dollars directly into the pockets of working people and help lift up local economies in New York City and across the nation,” the comptroller’s report states.
As Obama’s term is nearing its end, experts are unsure what will happen to the Final Plan.
“While Trump has said he wants to lighten the regulatory load on business, it’s not clear where he stands on the new overtime rule,” a CNN article states. “Since time is short for the Obama administration, it may be up to Trump’s Labor Secretary and Attorney General to decide whether to continue the pursue of appeal.”