Federal Judge Strikes Down US Overtime Rule

Federal Judge Strikes Down US Overtime Rule

After a year of controversy, litigation, and delays, the new overtime rule created by the US Department of Labor under the Obama administration last year has now been thoroughly defeated. US District Judge Amos Mazzant, who issued a preliminary injunction last November blocking the rule from coming into effect as scheduled in December 2016, has issued a final ruling and struck the rule down entirely, finding that the Labor Department erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions, The Hill reported late Thursday:

The judge’s ruling was celebrated by industry groups, including the Restaurant Law Center, which represents the restaurant industry. In a statement to The Hill, the group said the Obama administration “overstepped its authority.”

“The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule. Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with [the Department of Labor] on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted,” the group said in a statement.

To some extent, Mazzant’s ruling is redundant, as the Trump administration had already announced that it was rewriting the rule and issued a request for public comments as a first step toward amending it. The decision will put some constraints on that rewrite, employment lawyer Eric B. Meyer tells HR Dive, but won’t prevent the Labor Department from updating the overtime salary threshold in the more restrained manner its current leadership envisions:

And as for the judge questioning DOL’s authority, Meyer said it likely won’t prevent the the agency from now adopting a new threshold. The judge acknowledged that DOL is empowered to establish a salary level, “but it’s got to be reasonable,” he explained. The court also denied a request filed by the Texas AFL-CIO to take over the defense of the rule.

The litigious saga of the overtime rule is not yet over, however. At Lexology, Fisher Phillips lawyers Caroline J. Brown and Marty Heller discuss what happens next and what it means for employers:

[T]he 5th Circuit Court of Appeals is scheduled to hear oral arguments on the appeal from Judge Mazzant’s November injunction in the coming weeks. Coincidentally, earlier today the government asked the appeals court to cancel the October 3 oral argument and hold the case in abeyance “pending further discussions by the parties in an attempt to narrow the dispute and potentially eliminate the need for this appeal.” Where the parties and the appeals court will stand with respect to that pending motion is unclear in light of today’s lower court decision.

Finally, today’s decision will not sit well with worker advocacy groups and unions. We can anticipate that those in favor of the overtime rule will ask to step in to the case and take the place of the USDOL, which has announced that it will no longer support the original rule as proposed. If the court system permits these groups to take over the case, they will almost certainly appeal today’s decision to the 5th Circuit Court of Appeals.

Brown and Heller recommend that employers “continue to maintain the status quo” regarding their response to the overtime rule. Even though the Obama administration’s proposal to abruptly raise the overtime salary threshold from $23,660 to $47,476 was deemed excessive, there is broad consensus among policymakers, including Secretary of Labor Alexander Acosta, that the salary threshold is overdue for an update.

Most observers expect the department to adopt a new rule that raises the threshold incrementally over time and/or imposes different salary tests depending on location, company size, or type of role. Some employers that have raised salaries in anticipation of the new rule are opting to keep them in place, partly out of an assumption that the threshold will increase eventually regardless of the fate of the Obama administration’s rule.

Complicating matters still further, some states and localities have taken matters into their own hands and pursued overtime rules of their own for employers in their jurisdictions, based on the Obama administration’s rule. It is currently unclear how these states would respond to a change in federal policy, or whether Congress or the Trump administration might move to preempt those local rules.