LAS VEGAS (AP) — A federal court is blocking implementation of a regulation that would make an estimated 4 million more higher-earning workers in the United States eligible for overtime pay.
The U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction Tuesday that prevents the Department of Labor from implementing the changes until the rule's legality can be further examined. The order comes after 21 states sued to block the rule before it took effect on Dec. 1.
The lead plaintiff was Nevada Attorney General Adam Laxalt, who's a frequent critic of what he calls Obama Administration overreach.
The regulation would shrink the so-called "white collar exemption" and more than double the salary threshold under which employers must pay overtime to their workers.
Laxalt said the rule would burden private and public sectors.
Businesses have been scrambling to prepare for the onset of the Fair Labor Standards Act, which changes the threshold for overtime pay to $47,500. Salaried workers who make less than that are eligible for overtime pay when they work more than 40 hours in a week.
As the rules currently work, companies can avoid paying overtime to full-time salaried employees making as little as $23,660 by classifying them as “exempt.” Those workers aren’t entitled to overtime pay even if they work more than 40 hours a week.
The law that was supposed to go into effect on Dec. 1 would change that. The White House said the 40-hour workweek has eroded over the years, with workers putting in more hours without being compensated for them.
What does that mean for companies? They’d have to anticipate higher payroll costs, either by paying out more in overtime or raising the salaries of employees so they hit the $47,500 threshold to become exempt employees.
Companies could also make changes to paid time off, bonuses and incentive plans to compensate.
The salary threshold will be updated every three years. Based on projections, it is expected to rise to $51,000 by January 1, 2020, after the first update.