Login Register Subscribe
Current Issue

Overtime regulation struck down

Reprints

A federal judge has struck down the Obama administration’s overtime rule, holding that overtime should be determined on the basis of duties rather than salary.

The ruling is not unexpected, observers say, because the judge who issued it, Amos L. Mazzant III of the U.S. District Court in Sherman, Texas, had issued a preliminary injunction in November halting the overtime rule’s planned implementation in response to litigation filed by 21 states and dozens of business organizations.

There is also some question as to whether the ruling is academic, in light of the U.S. Department of Labor’s call in July for public comments on the rule, and the expectation that it would issue a new rule with a lower salary threshold.

Under the controversial overtime rule proposed by the Department of Labor during the Obama administration, the threshold for overtime-exempt employees was increased to $913 a week, or $47,476 annually for a full-time employee, from the current $455 a week, or $23,660 annually. Many employers have already introduced the change.

After Judge Mazzant issued his rule in State of Nevada et al. v. United States Department of Labor et al., the Labor Department appealed it to the 5th U.S. Circuit Court of Appeals in New Orleans.

In June, in what some observers describe as a surprise move, the Trump administration’s Labor Department asked the court to reaffirm its authority to establish a salary level for overtime-exempt employees.

But the Labor Department also asked that the court not address the validity of any specific salary level set by the 2016 final rule, which the department said it plans to revisit through new rule-making.

In what may or may not be a coincidence, the parties in the case filed a motion Thursday with the 5th Circuit asking that the court remove from its schedule for Oct. 3 oral arguments in the case because they “have been engaged in ongoing discussions on how to narrow the scope of their dispute and potentially eliminate the need for this interlocutory appeal.” The appeals court granted the motion the same day.

In his ruling Thursday, Judge Mazzant, who is an Obama appointee, said the rule “is not what Congress intended when it exempted “executive,” “administrative” and “professional capacity” employees from overtime.

“Congress unambiguously directed the Department to exempt from overtime pay employees who perform ‘bona fide executive administrative, or professional capacity’ duties,” said the ruling.

“However, the Department creates a Final Rule that makes overtime status depend predominantly on a minimum salary level, thereby supplanting an analyses of employees’ job duties,” said the ruling.

The ruling adds that the department estimates 4.2 million workers now ineligible for overtime and who fall below the minimum salary level will automatically become eligible under the rule without a change in their duties.

“Because the final rule would exclude so many employees who perform exempt duties, the Department fails to carry out Congress’s unambiguous intent” and is unlawful, says the ruling. It “has exceeded its authority and gone too far with the Final rule,” said the opinion, in granting summary judgment in the case.

The ruling was not a surprise, said Richard R. Meneghello, a partner with Fisher & Phillips L.L.P. in Portland, Oregon. “There weren’t many legal arguments raised in yesterday’s ruling that didn’t form the foundation of his original ruling,” which was that the Department of Labor had exceeded its authority.

Judge Mazzant has “leapfrogged the appeal,” which was based on the preliminary injunction, in ruling on the merits of the case, said Richard D. Glovsky, a partner at Locke Lord L.L.P. in Boston. It is possible the 5th Circuit will now issue its ruling on Judge Mazzant’s latest ruling, he said.

The latest ruling “almost makes the injunction irrelevant,” said Mr. Meneghello. He said right now “it all points in the same direction. This rule is not going to go into effect, and the DOL is ultimately going to propose a new threshold that’s substantially lower than the one” originally proposed.