Labor Department to Continue Court Battle on Obama Overtime Rule

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By Ben Penn

The Labor Department will file an appeal requesting that a judge’s order to shoot down the Obama administration’s overtime rule be stayed while the DOL considers a new rule, sources familiar with the litigation told Bloomberg Law.

The appeal and motion to stay, a surprise move which sources said will be filed by Oct. 30, would allow the DOL to proceed with a new proposal that sets a different salary threshold for overtime eligibility than the one issued in 2016. The DOL is likely to eventually issue a new rule and ask the appellate court to drop the case as moot.

The Obama rule was estimated to make some 4 million workers newly eligible for overtime pay, and was one of the previous administration’s top wage growth priorities. Critics said the new salary level was too high, too fast and would force businesses to cut jobs to meet higher payroll costs.

Judge Amos Mazzant ruled in August that the DOL exceeded its authority by issuing the rule, which would have doubled—to $47,000 per year—the salary under which workers are automatically entitled to overtime pay for all hours beyond 40 a week. Labor Secretary Alexander Acosta has signaled a more reasonable salary level might be around $32,000.

Some attorneys said the decision left uncertain the extent to which the DOL can use workers’ pay levels to determine overtime eligibility. Mazzant said the DOL focused too heavily on salary, instead of job duties, in the Obama rule.

If the U.S. Court of Appeals for the Fifth Circuit agrees to stay the decision, that would allow the DOL to neutralize the litigation while working on a new overtime rule.

The department is reviewing some 140,000 public comments on how the agency should issue a new regulatory proposal. The comments address issues such as the method for determining a new salary level and how to balance it against the Fair Labor Standards Act’s duties test for overtime exemption.

A spokeswoman for the Justice Department, which is coordinating the litigation strategy with the DOL, declined to comment. The DOL didn’t provide a comment.

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

To contact the editor responsible for this story: Chris Opfer at copfer@bna.com

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