A federal court in Texas has halted the US Department of Labor's rule to extend overtime pay to over 4 million salaried employees who fell under the proposed threshold cover of $47,500, over and above the old threshold of $23,660.
The rule also required that the salary threshold be revised every three years, and was to take effect from December 1.
About two months ago, 21 states filed a lawsuit against the Labor Department and requested a nationwide injunction to prevent the rule from taking effect. They stated that the rule raised the threshold too high, also by providing automatic updates every three years.
The US Chamber of Commerce and other business groups also filed a similar lawsuit which was consolidated with the states' case because it raised the same questions, such as legality of the law and its impact on businesses.
U.S. District Judge Amos Mazzant sided with the states and said that DOL overstepped its authority in issuing the rule that the rule would have rendered "irreparable harm" to businesses should the preliminary injunction not be imposed.
Supporters of the rule claim that it would have benefited millions of Americans and improved their livelihoods. They say that employees in the salary bracket of $23,000-$47,000 (approx.) are making only as much as minimum wage after factoring in all the hours put in for the job.
But according to critics, this rule will unjustly affect small businesses and non-profits. Opponents also argue that the companies will not be able to hire as many full time employees, and in worst cases, may have to lay off their employees and hire them on hourly jobs.
The DOL released a statement disapproving the court verdict and said that it was considering to take the case further.
"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. We are currently considering all of our legal options."
The Society for Human Resource Management (SHRM) was one of the organizations which opposed the rule. Nancy Hammer, a senior government affairs policy counsel for SHRM said that SHRM "played a key role in highlighting the difficulties of the rule and raising awareness of its negative impacts on the workplace including its impact on workplace flexibility and employee morale."
"The court's decision is welcome news for SHRM members and employers who have been struggling with the impacts of the rule-especially nonprofits and smaller organizations," Hammer added.