Federal District Court Strikes Down Obama-era Overtime Rule

Sep 5, 2017

On August 31, 2017, Judge Amos L. Mazzant, a federal judge for the United States District Court for the Eastern District of Texas, struck down the Obama-era Department of Labor (“DOL”) rule that would have significantly expanded overtime eligibility by more than doubling the salary threshold under the Fair Labor Standards Act’s (“FLSA”) exemptions for executive, administrative, and professional employees.

The rule—which had been scheduled to take effect in 2016—would have greatly expanded overtime eligibility by raising the salary level necessary for employees to qualify as “exempt” from overtime pay. Specifically, the rule would have raised the minimum salary threshold required to qualify for the FLSA’s white-collar exemptions from $23,660 per year to $47,476 per year.

In late 2016, various states and business groups filed lawsuits seeking to block the rule from going into effect. These lawsuits were ultimately consolidated before Judge Mazzant. In November 2016, the Court issued an injunction that temporarily prevented nationwide enforcement of the rule. Thereafter, on August 31, the Court granted summary judgment in favor of the states and business groups, declaring the rule invalid.

In setting aside the rule, the Court reasoned that the DOL lacked the authority to set a salary threshold so high that it would “effectively eliminate” other requirements for when a person is eligible for overtime, such as what duties they perform: “The [DOL] creates a final rule that makes overtime status depend predominantly on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. Because the final rule would exclude so many employees who perform exempt duties, the [DOL] fails to carry out Congress’s unambiguous intent.”

With this ruling, employers can feel more comfortable that the expanded minimum salary threshold in the Obama-era rule will not go into effect anytime soon. Nonetheless, the Trump DOL may seek to impose a more modest increase of the minimum salary threshold. Indeed, the DOL recently issued a highly detailed Request for Information (“RFI”) for purposes of new rulemaking related to the FLSA’s overtime regulations, including several questions related to salary levels.

KWW will monitor the DOL’s action on this issue and communicate any developments. And until further action, the minimum salary threshold for the white-collar exemptions will remain where it has been since 2004, at $23,660 per year.

Should you have any questions regarding this ruling, please feel free to contact John Hofstetter, Katie Basch or any KWW attorney.

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