News and analysis
November 23, 2016

Federal Judge Temporarily Blocks Obama’s Expansion of Overtime Pay

A federal judge has temporarily halted implementation of a federal policy intended to confer overtime benefits on more than 4 million additional workers, including many at nonprofits.

The rule change, championed by the Obama administration and scheduled to take effect Tuesday, would expand time-and-a-half pay to salaried employees who make up to $47,476 a year, double the existing ceiling to qualify for overtime. The measure was temporarily blocked Nov. 22 by a federal judge in Texas, who granted an injunction sought by 21 states and a group of business leaders.

A hearing to determine whether the new rule will be permanently blocked could take place as early as Monday.

U.S. District Court Judge Amos Mazzant’s ruling caught many nonprofit leaders by surprise and puts in limbo a policy shift that had already sparked debate about how to properly compensate people who work in the charity world, said David Thompson, vice president of public policy at National Council of Nonprofits. He predicted those conversations will lead to lasting change regardless of the judge’s upcoming ruling.

"Nonprofits do not want to be the employers of last resort," Mr. Thompson said. "We want to comply with the laws. We don’t want our employees on public assistance."

Raises Already Given

The overtime rule has been contentious since even before it was officially issued in May. Some nonprofit employers argued that the expansion would overburden their budgets, forcing organizations to cut staff hours and reduce services. Labor leaders, however, hailed the measure as a step toward fairer compensation for charity employees.

The House of Representatives passed a proposal in September to delay the effective date of the overtime expansion to June 2017. According to news reports, revoking the policy may be a priority for the incoming Trump administration and Republican-controlled Congress.

Threatening to take away the proposed overtime benefits after they’ve been granted would be unpopular, says Ross Eisenbrey, vice president of the Economic Policy Institute, which favors the new rule.

"Some employers, including nonprofits, have already given raises to keep exempt employees above the threshold," he said. "Most full-time workers think they deserve extra pay when they work long hours."

If Judge Mazzant rules that the measure can take effect in the next few weeks, it could be difficult for the next president to revoke it due to rules governing federal procedures, Mr. Thompson said. And if the judge permanently blocks the policy, he added, the Department of Labor is likely to appeal the decision.

In a statement, the federal agency said it is "considering all our legal options."

"We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans," the department said. "The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule."

Regardless of what happens, nonprofits must still comply with existing labor laws, Mr. Thompson said.

"The best news is that nonprofits now have a better understanding of their obligations under the law," he said.

Editor's note: This article has been updated to include a statement from the Labor Department.

Send an email to Rebecca Koenig.