Judge Issues Delay for Overtime Rule

November 23, 2016

AA017956On Tuesday, Nov. 22, a federal judge in Texas issued a preliminary injunction against the Department of Labor’s (DOL) overtime rule which was set to go into effect Dec. 1, and would have doubled the current threshold under which employees must be paid overtime. The National Small Business Association (NSBA) has strongly opposed the overtime rule as it represents a major economic burden and adds massive new layers of complexity for America’s small businesses.

“NSBA and its members have, since day one with this regulation, warned regulators that the cost of compliance with this sweeping new rule would be far greater than expected,” stated NSBA President and CEO Todd McCracken. “I am pleased that Judge Amos Mazzant recognized this burden and put a hold on it—if even only temporarily.”

In addition to the significant burden of compliance this regulation poses for small business, the rule also contains significant uncertainty for smaller enterprises given the difficulty in clearly delineating between “exempt” and “non-exempt” jobs in the typical small business workplace. Furthermore, the creation of new hourly reporting and tracking requirements are likely to be a disproportionate burden on smaller firms given there are fewer staff members to take on those tasks, and could result in forcing struggling small firms to reduce employee hours.

In September, two court cases were filed against the DOL’s rule; one from officials representing 21 U.S. states; and the other from a coalition of business groups – claiming the rule will place a heavy burden on state budgets and businesses, respectively. Both cases were filed in the same federal court in Sherman, Texas and assigned to Judge Mazzant. Given the rapidly approaching effective date, plaintiffs in both lawsuits requested an expedited judgment, which was granted in the form of the temporary injunction against the DOL implementing the rule until a final decision is handed down.

In his temporary ruling, Judge Mazzant stated that, “…the Final Rule exceeds the Department’s authority under Chevron,” signaling he is likely to permanently overturn the rule. He also cited the Fair Labor Standards Act duties test, writing that the DOL’s rule “creates essentially a de facto salary-only test,” a key criticism NSBA expressed in its comments.

“NSBA has strongly supported Congressional efforts to delay and halt this regulation from becoming law. This temporary injunction, and the possibility that it ultimately will be blocked permanently sends a strong message of support and understanding of what it means to run a small business in today’s economy,” McCracken went on to say.

Please click here to download NSBA’s comment letter.