Federal Court Rejects Obama-Era Overtime Rule

A worker, by Getty.
A worker, by Getty.

Last week, a federal district judge in Texas invalidated a key Obama-era overtime regulation that would have made it more likely states and local governments would have had to pay more employees overtime.

Per the Fair Labor Standards Act (FLSA), executive, administrative, and professional “white collar” employees do not have to be paid overtime if they work more than 40 hours a week. Per Department of Labor (DOL) regulations, adopted shortly after the FLSA was adopted in 1938, employees must perform specific duties and earn a certain salary to be exempt from overtime as white collar employees.

On May 23, 2016, DOL issued final rules nearly doubling the previous salary level test for white collar employees from $455 per week, or $23,660 per year, to $913 per week, or $47,476 per year. The rules also automatically update the salary level every three years for white collar employees.

According to the Judge Mazzant, DOL does not have the authority to adopt a salary test that effectively eliminates the duties test, which is what the final rule does. The text of the final rule explicitly says that those earning less than $913 will be eligible for overtime “irrespective of their job duties and responsibilities.” The court likewise concluded that the automatic updating mechanism is unlawful.

In November 2016, Judge Mazzant issued a nationwide injunction temporarily preventing the overtime rule from going into effect. On appeal of that ruling, the Trump administration did not defend the Obama salary level, only challenging the ruling to the extent that it appeared to say that DOL could not promulgate a salary test at all. In his most recent ruling Judge Mazzant backed off of that position stating: “This opinion is not making any assessments regarding the general lawfulness of the salary-level test or the Department’s authority to implement such a test.”

Some have speculated the Trump administration has dropped its appeal of the preliminary injunction in light of Judge Mazzant’s more recent ruling. This case, and the Obama regulations, may be over: Judge Mazzant also rejected the Texas AFL-CIO’s request to intervene in the case and defend the Obama rule.

The Trump administration is expected to raise the salary test through regulations — but not as high as the Obama rule. To that end, in July the Trump administration issued a request for information regarding the white collar exemption.

photo - Lisa Soronen
photo - Lisa Soronen
Executive Director, State & Local Legal Center
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