A Texas federal court has struck down the 2016 U.S. Department of Labor’s rule that would have greatly increased the number of employees eligible for overtime pay.
This may seem like old news to those who have been following the rule. In November 2016, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a preliminary junction, preventing the rule from becoming effective (which would otherwise have occurred in December 2016). The rule would have significantly raised the salary level that qualifies an employee for an exemption from overtime eligibility under the Fair Labor Standards Act regulations. Judge Mazzant stated that, pending further review by the court, the rule’s challengers were likely to be able to show that such a significant increase would exceed the agency’s authority. (We addressed that decision in a prior post on this blog.)
The Department (then under the Obama Administration) appealed that ruling to the Court of Appeals for the Fifth Circuit. Even after the change in administration, the Department asked the court to overturn the injunction, asserting that the Department has the authority to use a salary test for the exemption. New Labor Secretary Acosta reportedly indicated in congressional hearings that while he believes the rule set the salary test too high, the overtime exemption nonetheless needed updating. The Department requested public input on whether the exemption should have a salary level test, and if so what that level or levels should be. The request also addressed certain other topics related to the exemption, such as the extent to which commissions should count toward meeting the test, and whether the level should be automatically updated. The comment period for the Department’s request ends on September 25th.
The news is that last week, Judge Mazzant issued a final summary judgment in the original challenge to the rule. He agreed with his preliminary statements that the Department lacks the authority to establish such a high salary test, as that test then essentially supplants other criteria (such as the types of duties the employee performs) for determining who is exempt from overtime eligibility. The court’s ruling makes the pending appeal to the Fifth Circuit moot.
Questions remain, though, as to what the current administration will do regarding employees’ eligibility for overtime pay. According to estimates, the prior rulemaking would have affected 4.2 million employees, but it faced opposition from many types of employers (and consequently from many on Capitol Hill). The Department now specifies that it will not advocate for such an expansion. Accordingly, if and when Secretary Accosta resurrects the overtime exemption, odds are that number will come down.