Federal Judge in Texas Halts Implementation of New Overtime Rule

On November 22, 2016, a federal judge issued a preliminary injunction against the U.S. Department of Labor‘s impending rule expanding the number of workers who would be eligible for overtime pay.  The DOL increased the overtime salary limit below which workers automatically qualified for overtime pay from $23,660 to $47,892. This regulation was scheduled to take effect on December 1, 2016, but is now halted until the merits of the case are decided.  

This regulation was pushed by the Obama Administration to put more money in workers’ pockets nationwide. It particularly affects many low- and middle-income white collar professions where overtime is common, and faced significant opposition from business groups. This rule grants time-and-a-half overtime pay to salaried employees who make under $47,892 annually (or $921 per week). The previous limit (and the one still currently in effect) is $23,660 annually, or $455 per week. This new limit would have also automatically increased with inflation on January 1, 2020. Altogether, it would be the biggest adjustment of the salary basis for low-income white collar workers in 40 years, affecting over 4 million workers.

Twenty-one state attorneys general filed a lawsuit in September against the Department of Labor, alleging that this change was not conducted in accordance with the Administrative Procedure Act, which governs how federal agencies can make rules and regulations. As the rule was to take effect on December 1, 2016, the attorneys general sought to block it from taking effect while the case moved forward. Judge Amos L. Mazzant III of the Eastern District of Texas ruled that the Department of Labor exceeded its authority by raising the overtime salary limit through its rulemaking process. In deciding the case under a standard used for preliminary injunctions, the judge found that the adjustment was so significant that it exceeded the powers granted to the Department of Labor by Congress under the FLSA. Specifically, the judge reasoned that Congress granted authority to the DOL to define white collar jobs not based on salary, but based on the duties performed. Some liberal commentators are taking issue with the judge’s reasoning, noting that the test is – and has always been – a two-part one: to first determine whether the employee’s salary meets the limit, and if it does, to then determine if the employee’s duties are, in fact, white collar duties. The judge’s ruling, they say, takes issue not with the recent rule, but with a decades-old and long-established test.  

This injunction only temporarily suspends the regulation until the parties adjudicate their case on the merits before the court. A hearing on whether to permanently block the regulations is scheduled for this week. Even if the rule is implemented at a later date, it is a certainly a blow to the over four million workers who would have benefited from this regulation beginning on December 1, 2016.