News Update: Texas Judge Enjoins Enforcement of U.S. DOL’s Overtime Rule Set to Take Effect on Dec. 1

breaking news legalJudge Amos Mazzant, the President Obama-appointed federal judge sitting in the U.S. District Court for the Eastern District of Texas, issued a decision on November 22, 2016, granting an emergency injunction against the United States Labor Department’s overtime rule.  The rule, previously set to take effect Dec. 1, doubles (to $47,476) the salary threshold for employees to be considered exempt for overtime pay when they work more than 40 hours in a given week.

The Plaintiffs -- business groups and twenty one states suing over the rule, led by the U.S. Chamber of Commerce -- argued that the amount of the DOL’s mandated increase in the salary violated the federal Fair Labor Standards Act.

Judge Mazzant accepted the argument of the plaintiff states and business groups that Congress did not authorize the Department of Labor to set a minimum salary threshold for the white collar (or “EAP”) exemptions. He found that the terms “executive,” “administrative,” and “professional” have plain meanings that relate to the duties and functions such employees perform, and that are not related to any minimum salary level.  And he rejected the Department of Labor’s contention that its authority – specifically granted by Congress – to “define and delimit” those terms carried with it the power to set a salary floor.

The judge recognized that the Department first required that exempt EAP employees be paid on a salary basis in 1940, and that the minimum salary threshold first appeared in the regulations in 1949.  He acknowledged that the regulations – or at least various aspects of them – have been upheld in several cases at the Supreme Court and the Fifth Circuit Court of Appeals.  (The U.S. District Court in Texas, where Judge Mazzant sits, is part of the Fifth Circuit.)  But he found that the Department’s authority to set the salary threshold for the EAP exemptions had never been directly challenged, so the prior rulings were not dispositive of that question.

Finally, Judge Mazzant determined that a nationwide injunction is appropriate, rather than an injunction confined to the plaintiff states.  He concluded that the public interest would be served by an injunction, since if his decision is overruled the implementation of the new rule will merely be delayed, while the absence of an injunction would cause irreparable harm to the states if the rule were to go into effect on December 1 as planned.

What is the likely impact of this decision?  It seems probable that the Department of Labor will appeal.  But the Fifth Circuit, which would hear the appeal, has not been a friendly forum for the Obama administration’s regulatory initiatives.  Moreover, with the change in administrations coming in January, the new leadership of the DOL may very well choose not to fight this decision.  That would mean the old regulations would remain in place for the foreseeable future.  But even the old regulations may now be challenged on the ground that the DOL had no authority to set a minimum salary level.  There is sure to be some jockeying in Congress, as both Democrats and Republicans may want to be seen to do something for workers who would have benefited from some increase in the salary threshold.  Stay tuned….

Our previous discussion on the proposed overtime rule can be found here.

Posted in Compensation

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