Justice Department to Drop Pending Overtime Appeal

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By Chris Opfer

The Justice Department Sept. 5 asked a federal appeals court to dismiss the DOJ’s appeal in the ongoing battle over a stalled Obama overtime rule that was expected to make some 4 million workers newly eligible for time-and-a-half pay.

The move comes five days after a federal judge in Texas shot down the rule, which would have doubled the salary threshold (to $47,000 per year) under which workers are automatically entitled to overtime pay for all hours beyond 40 a week. Judge Amos Mazzant said the DOL overstepped its authority by focusing too heavily on workers’ pay, rather than their job duties, to determine overtime eligibility.

The Justice Department asked the U.S. Court of Appeals for the Fifth Circuit to dismiss the DOJ’s pending appeal of an earlier Mazzant ruling that temporarily blocked the rule before it took effect late last year. The DOJ wanted the Fifth Circuit to affirm the Labor Department’s general authority to take salary into account for overtime purposes. It told the court in the latest filing that Mazzant’s new decision made the appeal moot (Nevada v. DOL, 5th Cir., No. 16-41606, motion to dismiss file 9/5/2017).

The Labor Department is already reconsidering the rule, and has asked for public comment. Labor Secretary Alexander Acosta has signaled that the DOL may issue a new rule with a more moderate salary threshold bump, potentially in the low $30,000 range.

President Donald Trump’s critics were quick to slam the decision to drop the appeal, noting that it came the morning after Labor Day. “This is Trump’s latest action that is at odds with his campaign trail rhetoric, and it further shows how his economic agenda is solely designed to further rig the American economy for the rich—including Trump himself—at the expense of American workers,” Democratic political consultant Jessica Mackler told Bloomberg BNA via email.

Sources told Bloomberg BNA that the government could still appeal the ruling, perhaps to seek clarity on how and when the DOL can use workers’ salaries for overtime eligiblity determinations.

DOJ and Labor Department spokespeople declined Bloomberg BNA’s request for comment.

Business advocates and lawmakers, mostly Republicans, argued the rule would force employers to shed jobs to meet payroll costs.

“This rule would have been devastating,” Karen Harned, executive director of the National Federation of Independent Business Small Business Legal Center, told Bloomberg BNA. Our members told us they were going to have to reduce their workforce, she said. NFIB joined with other businesses groups and a number of states in the lawsuit challenging the rule last year.

Salary Questions

Just because the DOJ decided not to pursue the pending appeal doesn’t mean its lawyers won’t appeal Mazzant’s latest decision, sources on both sides of the debate told Bloomberg BNA.

Seth Harris, an acting labor secretary under President Barack Obama, told Bloomberg BNA the Trump administration might not be happy with parts of the decision that appear to limit the Labor Department’s authority. Mazzant also left open some questions about the extent to which the DOL can use pay levels to set overtime eligibility.

“The decision is perfectly unclear about what authority the labor secretary has,” Harris said. “It says this threshold is too high, but it doesn’t say why it’s too high or what threshold would be acceptable.”

The Fair Labor Standards Act generally requires employers to pay workers overtime for all hours worked beyond 40 per week. The law also delegates to the labor secretary the power to determine which workers should be removed from overtime requirements under the law’s white-collar exemption for workers in “bona fide executive, administrative, or professional” positions.

The overtime standards created in 2004 by the George W. Bush administration allow employers to exempt workers from overtime pay requirements if they make more than $23,500 annually and perform certain managerial duties. When the DOL rolled out the new rule in 2015, then-Labor Secretary Thomas Perez said doubling the threshold was the easiest way to put more money in workers’ pockets and avoid some of the uncertainty that comes with the “duties test.”

“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,” Mazzant wrote in the recent decision. “Instead, the Court is evaluating only the salary-level test as amended by the Department’s Final Rule.”

Acosta during his March Senate confirmation hearing acknowledged that Mazzant’s earlier decision left the salary threshold question unsettled. Whether the administration is satisfied with the new ruling remains to be seen.

To contact the reporter on this story: Chris Opfer in New York at copfer@bna.com

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

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