The Labor Department’s contentious overtime rule was blocked Tuesday by a federal judge in Texas, putting one of President Obama’s top regulatory initiatives in jeopardy.
In a 20-page order, Texas U.S. District Judge Amos Mazzant issued a temporary injunction halting the rule nationwide.
“Due to the approaching effective date of the Final Rule, the Court’s ability to render a meaningful decision on the merits is in jeopardy,” he wrote. “A 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 rule would have extended overtime pay to more than 4 million workers starting Dec. 1. It would have required employers to pay overtime to most salaried workers who earn less than $47,476 annually, a much higher threshold than the current annual salary limit of $23,660.
Dozens of business groups and 21 state attorneys general challenged the overtime rule in federal court.
Mazzant, who was nominated to the bench by Obama, noted that he’s not the first judge to bar national implementation of a department ruling. He cited a Fort Worth Texas court judge’s decision in August to block the Education Department from allowing transgender students to use the bathroom of their choice.
The order puts the future of Obama’s overtime rule in doubt.
Experts say the litigation and possible appeal process is likely to drag out until the inauguration, which means President-elect Donald Trump could scrap the overtime changes by dropping the defense of the rule.
“Mr. Trump and his hand-picked Secretary of Labor will have a lot to say about whether the DOL will continue to pursue the rule in one form or another,” said Ryan Glasgow, a partner at the D.C. law firm Hunton & Williams LLP.
Trump has vowed to roll back Obama regulations that he says are hurting the economy. He expressed support for changing the overtime rule during the presidential campaign.
“Rolling back the overtime regulation is just one example of the many regulations that need to be addressed to do that,” Trump told Circa in August. “We would love to see a delay or a carve-out of sorts for our small business owners.”
Business groups that supported the litigation against the rule hailed the judge’s move.
“Today’s decision is an important win for all manufacturers in America — halting what would have been a dramatic and devastating change in labor law that manufacturers could not afford,” said Linda Kelly, general counsel for the National Association of Manufacturers.
Kelly called on Trump to “right a regulatory and legal system that has pummeled the manufacturing industry in America.”
The National Federation of Independent Business (NFIB) claimed that 44 percent of small businesses employ at least one person who would have been subject to the higher overtime pay.
“This is a victory for small business owners and should give them some breathing room until the case can be properly adjudicated,” NFIB President and CEO Juanita Duggan said in a statement.
Duggan said the NFIB would continue to fight against the rule, which she said would raise small business expenses by forcing them to pay their employees overtime.
Obama had argued it was time to raise the threshold for giving overtime, partly as a means of helping people at the bottom of the social ladder.
Supporters of the rule like the National Employment Law Project (NELP) aren’t giving up the fight.
“The business trade associations and Republican-led states that filed the litigation in Texas opposing the rules have won today, but will not ultimately prevail in their attempt to take away a long-overdue pay raise for America’s workers,” Christine Owens, NELP’s executive director, said in a statement.
In an email to The Hill, labor attorney Michael Lotito said the injunction gives Congress time to consider a legislative solution to the issue.
In September, the House passed a bill to delay implementation of the overtime rule by six months.
“It also offers the in coming administration an opportunity to influence the important issues at stake in this litigation,” said Lotito, who co-chairs Littler Mendelson’s Workplace Policy Institute.
Whether the litigation will kill the rule entirely, he said, no one knows for sure.
“I suspect this is not going to be settled before Jan. 20.”
– Updated at 7:25 p.m.