Sep 01, 2017

The nail in the coffin: Judge invalidates DOL’s overtime rule?

On Aug. 31, the federal judge who in November 2016 halted the enforcement of the U.S. Department of Labor’s (DOL) significant increase in the salary-level test for executive, administrative and professional (EAP) employees ruled conclusively that the DOL had exceeded its authority when it increased that test. Federal District Court Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas invalidated the DOL’s Final Rule and held that the increase in the salary-level test from $455 per week to $913 per week effectively eliminated the duties test and was inconsistent with Congress’ intent in creating the EAP exemption in the first place.

Under the Fair Labor Standards Act (FLSA), all employees engaged in commerce receive overtime pay at a rate of one and one-half times the employee’s regular rate of pay for all hours they work above 40 hours in a week. The FLSA contains a number of exemptions to the overtime requirement. One exemption is for EAP employees. They are not eligible for overtime if they satisfy the following three tests:

  • The salary-basis test, which provides that they receive the same amount of pay for each week in which they work;
  • The duties test, which provides that they perform executive, administrative or professional duties as established by regulations; and
  • The salary-level test, which provides that they are paid at least $455 per week.

After a long and robust public comment period, the DOL published its Final Rule in May 2016 which increased the salary-level test from $455 per week to $913 per week. The Final Rule was to take effect on Dec. 1. By raising the salary-level, the DOL estimated that 4.2 million workers would become eligible for overtime without a change to their work duties.

Twenty-one states and some 50 business groups filed separate lawsuits in Texas that challenged the DOL’s authority to make these changes to the salary-level test. These states and business groups sought emergency relief to preserve the $455 per week salary test for EAP employees.

On Nov. 22, Judge Mazzant granted a preliminary injunction which prevented the Final Rule from taking effect on Dec. 1. This injunction applied to all states and businesses on a nationwide basis. In early December, the DOL appealed the preliminary injunction. Briefs were filed in the U.S. Court of Appeals for the Fifth Circuit and arguments on the appeal have been scheduled for next month. During the appeal of the preliminary injunction, the underlying case continued before Judge Mazzant. The business groups filed a motion for summary judgment which asked the Court to decide as a matter of law that the DOL had exceeded its authority in increasing the salary-level test.

On Aug. 31, Judge Mazzant granted the motion for summary judgment and entered a final judgment that dismissed the states’ and business groups’ cases. The judge ruled that the DOL had exceeded its authority in increasing the salary-level test to a level that effectively eliminated a consideration of the job duties that many executive, administrative and professional employees performed. In his decision, Judge Mazzant recognized that Congress had delegated authority to the DOL to define and delimit the EAP exemptions, but he ruled that the DOL must exercise that authority in a manner consistent with Congress’ intent. He found that the DOL had acted inconsistently with Congress’ intent by effectively eliminating consideration of the duties test for many EAP employees.

Typically, the judiciary affords much deference to an agency’s interpretation of the laws it enforces. Judge Mazzant acknowledged that deferential standard but explained that the judiciary is the final authority on issues of statutory construction. He found that the DOL had gone too far with the Final Rule. He concluded there was nothing in the statutory language that allowed the DOL to make an EAP employee’s salary, rather than the employee’s job duties, determinative as to whether the employee is exempt from overtime pay.

This decision may be the final nail in the coffin setting aside the increased salary-level test for EAP employees. It seems unlikely the DOL, which is currently seeking public comment on the EAP exemption, will appeal this decision. Secretary of Labor Alexander Acosta indicated in his confirmation hearings that he supported an increase in the salary-level test, but thought the Final Rule’s increase to $913 per week was too high.

For more information on the overtime rule and other employment law topics, contact one of Chuhak & Tecson’s employment attorneys. 

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Jeralyn H. Baran, Principal