LAS VEGAS — A federal court is blocking implementation of a regulation that would make an estimated 4 million more higher-earning workers eligible for overtime pay.
Businesses had been scrambling to prepare for the onset of the Fair Labor Standards Act, which would change the threshold for overtime pay to $47,500. Salaried workers who make less than that would be 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 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.
But 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, since 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.
If the law does go into effect, companies would 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.
In Indiana, the law was expected to affect nearly 250,000 workers. The salary threshold would also be updated every three years, and based on projections, would rise to $51,000 by January 1, 2020, after the first update.