Judge Blocks Overtime Rule in Surprise Decision

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Ben Penn

Nov. 22 — A federal judge Nov. 22 barred the Labor Department from implementing its new overtime rule, unexpectedly granting an injunction that deals a severe blow to one of President Barack Obama’s landmark workplace regulations ( Nevada v. DOL , E.D. Tex., No. 4:16-cv-00731, motion granted 11/22/16 ).

The court enjoined the rule nationwide, days before it was scheduled to take effect Dec. 1. Some 4 million workers were expected to become newly eligible for time-and-a-half pay under the rule.

Twenty-one states argued at a hearing Nov. 16 that injunctive relief was warranted because the DOL exceeded its authority in setting such a high salary threshold of $47,476, below which workers are automatically eligible for overtime pay.

Judge Amos Mazzant in the U.S. District Court for the Eastern District of Texas agreed with the states that the DOL wasn’t authorized to create a salary test at all. Mazzant said the department should have focused on the actual duties that workers perform, instead of the salary they make, in determining whether a worker qualifies for an exemption to overtime pay requirement for “executive, administrative, or professional” employees.

Law Doesn’t Allow Salary Test, Judge Says

Mazzant said the DOL’s interpretation of the Fair Labor Standards Act wasn’t entitled to the deference that courts often give agencies when they try to iron out ambiguities in the laws they administer.

The U.S. Supreme Court held in Chevron U. S. A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) that courts should defer to an agency’s interpretation of a law, only if the law is unclear.

The FLSA isn’t ambiguous, Mazzant said, because the terms “executive,” “administrative,” and “professional” have ordinary definitions. Drawing on an Oxford English Dictionary edition published a few years before the FLSA was passed in 1938, Mazzant said Congress was clearly referring to workers’ duties, not their salaries, when it created the exemption for executive, administrative and professional employees.

To the extent that FLSA is ambiguous, Mazzant said the rule still wouldn’t survive. Congress didn’t intend to categorically make large segments of the workforce eligible or ineligible for overtime based solely on their income, according to the judge.

Mazzant also quickly dismissed a provision of the rule that would have automatically updated the salary threshold every three years based on changes in average income. “Because the Final Rule is unlawful, the Court concludes the Department also lacks the authority to implement the automatic updating mechanism,” he said.

Future Uncertain Under Trump

The judge froze the rule before enforcement could begin, although many businesses had said they were already starting to comply with the new requirements. President-elect Donald Trump is likely consider revising the regulation through rulemaking or legislation, if the court winds up restoring it.

The Justice Department, which defended the agency, is expected to appeal the decision. DOJ spokeswoman Nicole Navas told Bloomberg BNA the department “is reviewing the court’s opinion and order and considering any next steps.”

“The government was unable to answer [Mazzant’s] concerns on the salary testing,” Karen Harned, executive director of the Small Business Legal Center for the National Federation of Independent Business, told Bloomberg BNA Nov. 22. “He also was so worried about the Chevron consideration. In the end, he was more concerned that they were not following the statute than he was concerned about Chevron.”

Harned, who attended a Nov. 16 hearing on the injunction, represents one of the business groups that filed the complaint.

The injunction was granted on the states’ request to block the rule before it went into effect.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com; Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.