Department of Labor Abandons Appeal of Overtime Rule

by Nexsen Pruet, PLLC
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Nexsen Pruet, PLLC

On September 5, 2017, the U.S. Department of Labor (DOL) asked a federal appeals court to dismiss its appeal of the court order blocking its controversial 2016 “overtime rule” from taking effect, signaling the DOL’s official abandonment of the Obama-era rule in favor of the agency’s plan to pursue less-drastic overtime reform.

Currently, the DOL’s regulations interpreting the Fair Labor Standards Act (FLSA) require that employees earn at least $23,660 per year, be paid on a “salary basis,” and satisfy one of several “duties tests” in order to be properly treated as exempt from overtime pay.  The DOL’s new overtime rule would have doubled the minimum salary required to maintain those “white collar” exemptions to $47,476, while leaving the “salary basis” and “duties test” requirements unchanged.  The Obama Administration expected that the new rule, originally scheduled to take effect on December 1, 2016, would entitle at least 4 million newly non-exempt workers to overtime pay. 

However, on November 22, 2016, a federal district judge in Texas, Judge Amos Mazzant, issued an injunction order temporarily blocking the implementation of the new overtime rule on a nationwide basis, just nine days before it was scheduled to take effect.  Judge Mazzant ruled that the DOL had overstepped its legal authority to interpret the FLSA by setting a minimum salary threshold for the white collar overtime exemptions because the FLSA statute defines the availability of those exemptions based on an employee’s duties, not the amount of his or her salary.   

Although the Obama-led DOL immediately appealed the injunction order to the Fifth Circuit Court of Appeals, the DOL’s commitment to pursuing the appeal remained uncertain in the months following the inauguration of President Trump in January 2017.  The DOL cited President Trump’s inauguration and Congressional resistance to his proposed appointees for Secretary of Labor (who oversees the DOL) as the grounds for multiple requests to delay appeal deadlines, but the DOL did not initially indicate whether, and to what extent, it would continue fighting the injunction order blocking implementation of the overtime rule. 

In June, the DOL filed a brief stating that it intended to move forward with the appeal of Judge Mazzant’s injunction order, but clarifying that its appeal would be limited to the portion of the order ruling that the DOL lacked the authority to impose a minimum salary in any amount.  In effect, the DOL made clear that it would not advocate to save the Obama Administration’s 2016 overtime rule with a $47,476 minimum salary threshold, but that it would still pursue the appeal solely to uphold the agency’s legal authority to implement a different overtime rule with a less-drastic increase in the minimum salary level.  This action clearly signaled that the Trump DOL intended to abandon the Obama-era overtime rule altogether and start from scratch with a new rule of its own.

Yesterday, September 5, 2017, the DOL confirmed its abandonment of the 2016 overtime rule by asking the Fifth Circuit Court of Appeals to dismiss its appeal of Judge Mazzant’s injunction order. 

The DOL stated that its appeal of the injunction was now moot because Judge Mazzant issued a final order last week striking down the overtime rule, meaning the injunction was no longer pending.  More importantly, Judge Mazzant’s August 31 order departed from his earlier injunction order by ruling that the FLSA did not necessarily preclude the DOL from setting a minimum salary threshold for the “white collar exemptions,” so long as the salary was not so high as to effectively make employees’ duties irrelevant.

At this point, continued appeals involving the blocked 2016 overtime rule are unlikely, but not impossible.  The DOL could appeal Judge Mazzant’s latest ruling in an effort to seek greater clarity about the scope of its authority to set a minimum salary level for the FLSA’s white collar exemptions.  However, Judge Mazzant’s recent order clearly stated that it should not be interpreted as an assessment of the “general lawfulness of the salary-level test or the Department’s authority to implement such a test.”  This language opens the door for the DOL to focus its resources on pursuing a new minimum salary rule without the need to further define the scope of its authority in that respect.  If the DOL decides against any further appeal, labor unions or other third-party advocacy groups could also ask the court to step in and pursue the appeal in the DOL’s place, in which case litigation over the 2016 overtime rule could drag on for months.

Meanwhile, the DOL has opened a new period of public comment on the minimum salary threshold for the FLSA’s white collar exemptions, an important but time-consuming administrative process suggesting that a new overtime rule is unlikely for the foreseeable future.  For future updates on the status of the overtime rule and other important employment and labor issues, please be sure to join our mailing list so that you receive our Mid-Week Memo and other important client alerts.     


 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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