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Commentary By Diana Furchtgott-Roth

Obama Administration Is Chastised Once Again by the Judiciary

Economics, Governance Employment, Civil Justice

A federal judge grants an injunction against the overtime rule

Saved by the gavel. On Nov. 22 Texas Federal District Court Judge Amos L. Mazzant III, an appointee of President Obama, granted an emergency nationwide injunction against the Labor Department’s overtime rule, set to go into effect Dec. 1.

The department is not allowed to implement or enforce the rule, which would have required all workers earning up to $47,476 a year to track their hours and be paid for overtime, even if they were executive, administrative or professional, previously exempt from overtime pay. The current ceiling is $23,660.

In his opinion, Judge Mazzant called the overtime rule “unlawful” and “contrary to the statute and Congress’s intent.” He writes that “this significant increase to the salary level creates essentially a de facto salary-only test. ... Congress did not intend salary to categorically exclude an employee with EAP [Executive, Administrative and Professional] duties from the exemption.”

The plaintiffs had questioned the legality of the automatic indexing of the $47,476 level that was planned for every three years. Mazzant said: “Because the Final Rule is unlawful, the Court concludes the Department also lacks the authority to implement the automatic updating mechanism.”

As well as increasing the complexity of hiring for employers, the new rule would have hurt workers who value job flexibility. This is because workers who must be paid overtime cannot be on salary, but have to fill out time sheets and keep track of every hour they work. They cannot receive comp time — time off in exchange for extra hours worked. If they work Saturdays and Sundays, they have to be paid overtime — they cannot take Monday and Tuesday off in exchange. If they are paid only for the hours they actually work, they lose money every time they need to leave work early. This especially affects working parents, who might want to take time to care for a sick child or attend a school sporting event.

The Labor Department acknowledges that most workers affected by the rule would have never worked over 40 hours per week. The administration estimates that about 4.2 million workers would qualify for overtime in 2017, and they would earn $1.2 billion more in overtime payments. But setting up the system for monitoring the employees could cost almost $20 billion in the first year because of the additional administrative costs.

Twenty-one U.S. states had filed suit on Sept. 20, and 50 business groups, led by the U.S. Chamber of Commerce, filed a separate suit. The judge’s decision makes it easier for President-elect Donald Trump to get rid of the rule.

This decision is an enormous rebuke to the Obama administration. Within six months, the Labor Department has lost in the courts on the so-called persuader rule, which would have forbidden companies from getting confidential advice from attorneys on labor issues; federal contracting rules that would have limited employers with alleged violations of labor laws from bidding on federal contracts; and now the expanded overtime rule. No other administration has been so chastised by the judiciary. The Obama administration has ignored the rule of law over and over.

Secretary of Labor Thomas Perez, and Wage and Hour Administrator David Weil have a lot to answer for. They are the architects of those rules and they failed. Weil, in his book “The Fissured Workplace,” argued that America needed to go back to 1950s laws in order to make sure workers had an adequate standard of living, even though the standard of living in 2016 is far higher than in 1955. But these rules are contrary to congressional intent.

America needs a strong secretary of labor to modernize our workplace laws consistent with the rule of law and separation of powers. Trump ran on a platform of following the law, and he has a tremendous opportunity to show that he can do it in the sphere of labor regulations.

Although plaintiffs are regularly overturning Secretary Perez’s regulations, the effort is not costless. It has cost companies billions of dollars to alter business plans to accommodate anticipated labor regulations rather than investing in their businesses and innovation, let alone the direct legal costs of challenging the various rules coming out of the Labor Department.

Yes, companies are winning in court, but at an enormous private and public cost. Businesses fearful of punishing regulations hire fewer workers, innovate less, invest less, and offer goods and services to the American public at higher prices.

President Obama’s overtime rule is the latest example of rule making run amok. Trump, when president, should repeal it once and for all.

This piece originally appeared on WSJ's MarketWatch

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Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter here.

This piece originally appeared in WSJ's MarketWatch