Federal judge blocks Obama rule extending overtime

A federal court in Texas on Tuesday prevented a rule from going into effect that would have made an estimated 4.2 million more workers eligible for overtime pay, starting Dec. 1, 2016.

First Look

A federal judge on Tuesday blocked a new federal labor law that would have extended overtime pay to 4 million American workers just in time for the holiday season.

Currently, mandatory overtime pay is offered only to workers paid less than $23,660 per year. The Department of Labor sought to double that threshold, which has been only slightly adjusted in four decades, in an attempt to counter inflation and rising costs of living. The US District Court in the Eastern District of Texas struck down the rule, arguing that the agency was acting beyond its delegated authority.

“It is... a disappointment to millions of workers who are forced to work long hours with no extra compensation, and is a blow to those Americans who care deeply about raising wages and lessening inequality,” Ross Eisenbrey, an economist with the left-leaning Economic Policy Institute, said in a statement.

The rule, which would have gone into effect Dec. 1, was a cornerstone in the Obama administration’s eleventh-hour plans for labor reform. Today, 7 percent of salaried workers are eligible for overtime pay, compared to some 62 percent who were eligible in 1975. The new rule would have covered about 30 percent of the workforce.

A coalition of 21 states and governors sought to thwart the proposed rule, arguing that the threshold change was arbitrary. The Department of Labor is now considering its legal options, but it’s unlikely that the rule will be heard again before president-elect Donald Trump takes office. Mr. Trump has been highly critical of government regulations under President Obama, and has aligned himself with business groups that tend to oppose changes in federal labor laws.

“This overtime rule is totally disconnected from reality,” said Karen Kerrigan, the president and chief executive of the Small Business and Entrepreneurship Council. “The one-size-fits-all doubling of the salary threshold demonstrated ignorance regarding the vast differences in the cost-of-living across America.”

If the rule had passed, it would have impacted some 4.2 million Americans in its first year. Nonprofit groups, retail companies, hotels, and restaurants – industries that rely on management workers who make less than the Department of Labor’s proposed threshold, but more than the current limit – stood to benefit the most from the change. So too did postdoctoral researchers, many of which work on critical biomedical and engineering projects.

“Post docs average about $43,000 a year nationwide,” Mr. Eisenbray told The Christian Science Monitor in May. “If they work 60 hours a week, they effectively make $15 an hour. That’s what fast food workers are asking for, and these are some of the best-educated Americans.”

But while many researchers in academia celebrated the proposed changes, university administrators "have been less enthusiastic," as The Christian Science Monitor’s Schuyler Velasco reported last spring:

They argue the pay raise is too abrupt and unwieldy, potentially costing large university systems millions in extra payroll costs. They also say it could have unforeseen negative consequences including lost jobs and higher tuition.  What’s more, they say (and even proponents of the change agree), academic research doesn’t adhere to a traditional 9 to 5 structure, making keeping track of post doc hours an all but impossible task.

But those costs could be offset by rebalancing university salaries overall, proponents say – many administrators and coaches earn six or seven figures per year, while some cancer researchers make just $15 an hour. And since colleges rely on post docs for marketing and grants, the money might have been well spent.

This report includes material from the Associated Press and Reuters.