The Independent View: Obama DOL's Overtime Rule Struck Down

A Texas Federal Judge on Thursday Invalidated the Obama Administration’s controversial Rule Expanding Overtime Protections to Millions of White Collar Workers, saying the U.S. Department of Labor used a Salary-Level Test that was too High to determine which Workers are Exempt from Overtime Compensation.

Finalized in the last year of President Obama's Term, the Regulation in question broadened Federal Overtime Pay Regulations to Cover nearly 4 Million more People. U.S. District Judge Amos Mazzant Granted Summary Judgment to the Plano Chamber of Commerce and more than 55 other Business Groups who had challenged the Obama Administration’s 2016 Rule that Raised the Minimum Salary Threshold required to Qualify for the Fair Labor Standards Act's "White Collar" Exemption to just over $47,000 per year and Increased the Overtime Eligibility Threshold for Highly Compensated Workers from $100,000 to about $134,000.

Judge Mazzant said that the “significant increase” would essentially render Meaningless the Duties, Functions, or Tasks, that an Employee performs if their Salary falls Below the New Minimum Salary level. “The department has exceeded its authority and gone too far with the final rule,” Judge Mazzant said. “The department creates a final rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties.”

Finalized in the last year of President Obama's term, the Regulation in question Broadened Federal Overtime Pay Regulations to Cover nearly 4 Million more People and would have Doubled the Threshold for Exempting “executive, administrative and professional” Workers from Overtime Pay. Texas, Nevada, and 19 other States quickly filed Suit challenging the Rule, and their Case was consolidated with a Lawsuit filed by the Business Groups.

Thursday’s Decision comes as the Fifth Circuit is simultaneously considering an Appeal of a Preliminary Injunction Judge Mazzant Issued late last year Blocking the Rule just days before it had been Slated to take Effect. The Obama Administration Appealed the Ruling before President Trump was Sworn in.

Labor Secretary Alex Acosta, meanwhile, told Congressional Lawmakers on several occasions earlier this year that the Department of Labor (DOL) would be seeking to Devise the Overtime Rule, setting the Salary Threshold somewhere between the Previous Level and the Level set by the Obama Administration, which Acosta criticized as being too Burdensome on Employers. In July, the DOL followed up Acosta's statements by issuing a Request for Information (RFI) seeking Public Feedback on ways to Revise the Obama Administration's Rule. That RFI came about a Month after the Agency filed a long-awaited reply Brief telling the Fifth Circuit that it would not Seek to Reinstate the Obama Salary level but that the Appellate Court should Overturn Judge Mazzant's Finding that the Agency lacks the Authority to set any Salary Test at all.

In Thursday’s Ruling, Judge Mazzant said the Rule didn’t Pass Muster under the U.S. Supreme Court’s 1984 Chevron USA Inc. v. Natural Resources Defense Council Inc. Ruling, which says Courts should Defer to an Agency’s own Views of a potentially Ambiguous Law. In this case, Judge Mazzant said Congress was Clear and Unambiguous in its intention that the Overtime Exemption to Apply to Employees who Perform: Bona Fide Executive, Administrative, or Professional Capacity, Duties. But by setting the Salary Level where it did, Judge Mazzant said the DOL effectively Eliminated the Duties Test for determining which Workers Qualify for the Exemption, something the Agency lacked the Authority to do. “Nor does the department have the authority to categorically exclude those who perform ‘bona fide executive, administrative, or professional capacity’ duties based on salary level alone,” the Judge said. “The updated salary-level test under the final rule does not give effect to Congress’ unambiguous intent.”

The Judge pointed out that under the DOL’s Estimate, 4.2 Million Workers currently Ineligible for Overtime and who fall Below the Minimum Salary Level would have Automatically become Eligible under the Final Rule without any change to their Job Duties. “Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress’ unambiguous intent,” the Judge said. Judge Mazzant, however, was careful to note that he wasn’t making any Determination regarding the General Lawfulness of the Salary Level Test or the DOL’s Authority to Issue one. “Instead, the court is evaluating only the salary-level test as amended by the department’s final rule, which is invalid under both steps of Chevron,” the Judge said. The Judge also concluded that a Provision in the Rule that would have Automatically Adjusted the Minimum Salary Level Every Three Years was also Unlawful under Chevron.

Maurice Baskin of Littler Mendelson PC, Counsel for the Business Groups, said that Judge Mazzant’s Ruling applies to Employers Nationwide and answers all the Questions that were Raised during the Preliminary Injunction Phrase of the Case. “All in all, it’s an excellent decision,” Baskin said, noting also that the Final Judgment in the Lower Court Proceeding should render the Fifth Circuit Appeal of Judge Mazzant’s Preliminary Injunction Moot.

In a separate Order, Judge Mazzant also Denied a Motion by the AFL-CIO to Intervene in the Case.

The Business Groups are Represented by Maurice Baskin, Robert Friedman, and Tammy McCutchen of Littler Mendelson PC, among others.

The States are Represented by Adam Paul Laxalt, Lawrence Vandyke, and Jordan T. Smith, of the Nevada Attorney General's Office and Ken Paxton, Jeffrey C. Mateer, Brantley Starr, and Austin Nimocks, of the Texas Attorney General's Office, among others.

The DOL is represented by Judry Subar, Julie Saltman, and Kevin Snell, of the U.S. Department of Justice.

The Case is State of Nevada et al. v. U.S. Department of Labor et al., Case Number 4:16-cv-00731, in the U.S. District Court for the Eastern District of Texas.