November 23, 2016

Texas court delays Labor's overtime rule

A federal judge in Texas on Tuesday granted a preliminary injunction delaying the Department of Labor's overtime rule, which was set to go into effect Dec. 1.

"This is a welcome delay for many small businesses, especially credit unions, that would not have been able to integrate this immense increase without impacting the services they provide," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "NAFCU and our members believe that this rule would have created major unintended consequences and obstructed growth opportunities for many white collar workers. Ultimately, in its current form, this rule could hurt the people it was trying to help."

The injunction by Judge Amos Mazzant of the Eastern District of Texas in Sherman, Texas, is only temporary, but it is possible that he will side with 21 state attorneys general that claim the overtime rule will increase costs and force the cut of essential government services.

The Department of Labor's rule raises from $23,660 to $47,476 the salary threshold at which employees are eligible for overtime pay under the Fair Labor Standards Act.

The court concluded that Congress intended the "executive, administrative, and professional" exemption, to which the Department of Labor's rule applies, should depend on an employee's duties rather than the employee's salary.

The court also noted that the states offered many examples of the significant costs they will incur due to the Department of Labor's rule, including "seven state officials who estimate it will cost their respective states millions of dollars in the first year to comply with the Final Rule."

This preliminary injunction "preserves the status quo while the Court determines the Department's authority to make the Final Rule as well as the Final Rule's validity," the court said.

Congress has also taken up legislation that would delay the overtime rule. In September, the House voted 246-177 to delay the rule's implementation by six months. An identical bill was introduced in the Senate. President Barack Obama has promised to veto the legislation.

Earlier this month, NAFCU wrote several House members to express support of their bill to phase in salary changes regarding the Department of Labor's overtime rule. The "Overtime Reform and Enhancement Act (OREA)" (H.R. 5813) would phase in the rates of pay for executive, administrative, professional, outside sales and computer employees, which NAFCU said would be beneficial to credit unions.