Federal Judge Strikes Down Overtime Rule, Leaving Trump Labor Dept to Decide What Follows

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently working on a book about textile artisans.

Federal District Court Judge Amos Mazzant yesterday quashed an overtime rule that would have raised the threshold for capping mandatory overtime pay from $23,660 to $47,476 a year.

If that rule had taken effect, 4 million more workers would have been eligible for overtime pay, as reported by Bloomberg.

The previous threshold was set in 2004. The new rule that raised it was promulgated by the Department of Labor in 2015, following an March 23, 2014, presidential memorandum that directed the Secretary of Labor to “modernize and streamline the existing overtime regulations for executive, administrative, and professional employees.”  I point out in passing that this direction via presidential memorandum is not a new, exclusively Trumpian phenomenon.

Fair Labor Standards Act Requirements

Under the Fair Labor Standards Act, employers are required to pay employees overtime when they work more than 40 hours a week. But this requirement is subject to a salary cap. Further, there is an exemption for white collar workers, who hold “bona fide executive, administrative, or professional” positions, according to Bloomberg.

Twenty-one states, led by Nevada Attorney General Adam Laxalt, and a coalition of business groups had separately sued to block implementation of the rule, according to The New York Times.

In November 2016, one week before the new rule was due to come into effect on 1 December– Mazzant– an Obama-appointee– had issued a decision and granted a preliminary injunction delaying the  implementation of the rule, a signature achievement of the then-administration. Many employers had already adjusted work schedules in anticipation of the new rule taking effect, as reported by The Wall Street Journal, and many didn’t immediately reverse those decisions.

Status of Appeal

The Department of Labor appealed that ruling before Trump was inaugurated.

During the campaign, in August 2016, Trump had pledged to overturn the overtime rule if elected president, as reported by The Hill:

“Rolling back the overtime regulation is just one example of the many regulations that need to be addressed to do that,” Trump told Circa at the time. “We would love to see a delay or a carve-out of sorts for our small business owners.”

In June of 2017, the Trump Labor Department indicated it intended to revisit the rule and has subsequently solicited public comments. Labor Secretary Alexander Acosta has suggested that the agency may consider revising the salary threshold to somewhere near $32,000 a year.

The agency in June also asked an appeals court to affirm that Labor has authority to consider salary when determining eligibility for overtime for eligibility purposes. Although arguments have already been scheduled for October 3,  Mazzant’s latest decision may have rendered such action moot. For in that decision, Mazzant allowed that the Department of Labor may evaluate salary, but indicated that such a test needed to be considered in light of an employee’s duties as well and cannot “categorically exclude” workers from falling under the white-collar exemption that precludes eligibility for unemployment “based on salary level alone,” according to Bloomberg.

Implications and Reactions

Jerri Lynn here: Trump has thus far failed to achieve any significant legislative successes, to be sure. But those who write off his presidency prematurely as somehow “failed” due to the lack of legislative achievements are missing the major changes his appointees are making in areas such as financial, securities, and environmental regulation, to name some  areas (see here for financial regulation; here and here for some SEC examples, and here for the EPA, among other posts). Some of these actions were launched by the Republican-controlled Congress, which has effectively overturned regulations using authority provided under the Congressional Review Act (a subject I have written about herehere, here, and here). Trump also walked away from the Paris Accords on climate change (limited and unsatisfactory as they are).

Make no mistake, this latest overtime decision helps doom millions of Americans to continue to labor in underpaid, crapified jobs (although I should point out it’s not the only factor). And  thus far the Trump Labor Department has yet to propose any new overtime policy. Unsurprisingly, as The Hill reports:

The judge’s ruling was celebrated by industry groups, including the Restaurant Law Center, which represents the restaurant industry. In a statement to The Hill, the group said the Obama administration “overstepped its authority.”

“The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule. Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with [the Department of Labor] on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted,” the group said in a statement.

Likewise, the National Association of Manufacturers also applauded Mazzant’s decision; over to The Hill again:

“Today’s decision is an important win for all manufacturers in America — halting what would have been a dramatic and devastating change in labor law that manufacturers could not afford,” said Linda Kelly, general counsel for the National Association of Manufacturers in November.

The New York Times spelled out some labor thinking on the issue:

But the union-backed National Employment Law Project said the judge ignored that the U.S. Department of Labor spent two years working on the rule and reviewed nearly 300,000 public comments before adopting it.

Bottom Line

Mazzant’s decision leaves it up to Trump’s Labor Department to decide how rules last updated in 2004 should be modernized. Somehow, I don’t foresee much scope for labor-friendly policies, with any expansion of eligibility for overtime that may be enacted to be extremely modest at best.


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