A Texas judge blocked Department of Labor overtime rules set to take effect next week, meaning employers can ignore the deadline for now.
On a late-Tuesday ruling, Judge Amos Mazzant of the Eastern District of Texas to granted a preliminary injunction to 21 state plaintiffs, led by Nevada. The rule affects an estimated 4.2 million workers who were to be newly eligible for time-and-a-half wages for each hour they worked beyond 40 each week.
The rule would roughly double the $23,660 threshold at which executive, administrative and professional employees are exempt from overtime. The DOL estimates the new rule would affect more than four million workers, and 19 percent of all insurance industry workers.
Mazzant ruled that the plaintiffs proved both the likelihood of winning a court case, and irreparable financial harm – two key standards often difficult to achieve to gain an injunction.
In a hearing held last week, plaintiffs cited the cost to the Kansas Department for Children and Families and the Kansas Department of Corrections. Those agencies have over 50 percent of employees affected by the OT rule, according to court documents.
“Agencies with budgets constraints, such as the two in Kansas, have relatively few options to comply with the Final Rule—all of which have a detrimental effect on government services that benefit the public,” Mazzant wrote.
The Labor Department could seek an expedited appeal to get the law on the books during President Barack Obama’s final weeks. Or the agency could drop the appeal after Republican President-elect Donald Trump takes office in January.
The DOL has strong grounds for an appeal, said lawyer Erin M. Sweeney of Miller & Chevalier in Washington, D.C., but it might not matter.
"Even with an expedited appeal, it will be the Trump Administration that will have the final word," she added via email.
In August, Trump cited the overtime rule an example of the type of burdensome business regulations he would seek to roll back as president.
Speaking Friday at the National Association of Independent Life Brokerage Agencies (NAILBA) annual conference in Dallas, employment lawyer Don Phin said the insurance industry isn’t the focus of the law.
But that doesn’t mean the industry wouldn’t be affected in a significant way. Agencies would need to know the new rules on who is considered exempt because they are considered “administrative,” for example.
According to court documents, the DOL received more than 293,000 comments on the proposed rule, including comments from businesses and state governments, before publishing the final version on May 23, 2016.
The OT rule increases the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually). The new salary level is based upon 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 rule also establishes an automatic updating mechanism that adjusts the minimum salary level every three years.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].