Federal judge defers Obama administration overtime rules a week before implementation

Business groups across the U.S. cheered a decision by a U.S. District Court in Texas postponing the Obama administration’s new overtime rules that determine how much employees working more than 40 hours a week must be paid.

Federal Judge Amos Mazzant of the U.S. District for the Eastern District of Texas, granted plaintiffs an emergency preliminary motion to prevent the U.S. Department of Labor from implementing new overtime rules that were to go into effect Dec. 1. The injunction will remain in place until the courts reach a final decision on their legality.

The original lawsuit, led by attorneys general in Texas and Nevada, asked the court to declare the “new overtime rules and regulations are unlawful” because they exceed statutory rights, were enacted “without observance of procedure required by law,” are arbitrary and capricious, and are unlawful as applied to the States and their employees. The AGs also asked the federal court for declaratory relief, and a “permanent injunction” preventing the Labor Department from implementing, applying, or enforcing the new overtime rules and association regulations. On Sept. 20, Arkansas Attorney General Leslie Rutledge joined the coalition of 21 states in challenging the DOL’s new rules.

The DOL issued the final rule that would raise the salary threshold in May from $23,660 to $47,476 a year, under which most salaried workers are guaranteed overtime. DOL officials said the rule would extend overtime protections to 4.2 million additional Americans who are not eligible for overtime under federal law, boosting workers’ wages by $12 billion over the next decade. All employees would have been entitled to overtime if they earn less than $913 a week – including government employees. The rule also would have automatically updated the salary threshold every three years, to ensure it does not erode under rising wage levels and to make it harder for employers to misclassify workers to avoid paying the overtime pay they have earned.

DOL officials have said the final rule reflects input from hundreds of thousands of public comments and extensive stakeholder meetings with employers, business associations, small businesses, workers, advocates, nonprofit organizations, educational institutions, and state and local governments.

MAZZANT RULING
Mazzant, in his 20-page ruling, said the state attorney generals satisfied all the prerequisites for the preliminary injunction. He said the overtime rules exceeded the authority of the DOL under the Fair Labor Standards Act, and “also is arbitrary, capricious, contrary to procedures required by law, and otherwise contrary to law.”

Mazzant concluded: “The State Plaintiffs have established a prima facie case that the (Labor) Department’s salary level under the Final Rule and the automatic updating mechanism are without statutory authority. The Court concludes that the governing statute for the EAP (white collar) exemption … is plain and unambiguous and no deference is owed to the Department regarding its interpretation.”

In addition to halting implementation of a key plank of the Obama administration to improve wages for middle-class workers, Mazzant also turned back the Department of Labor’s request to limit the scope of the injunction only to those states named in the lawsuit.

However, Mazzant wrote that federal law has already established that “the scope of injunctive relief is dictated by the extent of the violation established, not by the geographical extent of the plaintiff class.”

“A nationwide injunction is proper in this case. The Final Rule is applicable to all states. Consequently, the scope of the alleged irreparable injury extends nationwide. A nationwide injunction protects both employees and employers from being subject to different EAP exemptions based on location,” Mazzant wrote.

BUSINESS GROUPS PLEASED WITH INJUNCTION
A number of national business groups cheered the ruling from the federal court in Sherman, Texas. The National Retail Federation, one of the dozens of business groups that filed a companion lawsuit against the DOL, said implementation of the new rules would force employers to limit hours or cut base pay in order to make up for added payroll costs.

“The Labor Department’s overtime changes are a reckless and aggressive overreach of executive power, and retailers are pleased with the judge’s decision,” said David French, NRF’s senior vice president of government relations. “We hope the judge ultimately finds in our favor, and in the meantime this timeout gives Congress a chance to take another look at the impact of these rules.”

The National Council of Chain Restaurants (NCCR) also applauded the federal court decision, expressing hope that the incoming Trump administration would work with businesses to come up with more reasonable overtime rules.

“The regulatory ‘timeout’ imposed by Judge Mazzant should allow Congress to vote to stop the regulation once and for all and would also let the incoming Trump administration create a more realistic and workable overtime solution based on sound economic considerations,” said NCCR Executive Director Rob Green.

Arkansas Chamber of Commerce President and CEO Randy Zook said the ruling was a “major victory for employers” and “avoids enormous disruptions in the workplace that would have been caused by the rule.”

Arkansas AFL-CIO President Alan Hughes, however, has called the new overtime rules an important first step to guarantee overtime protections to millions more working people by raising the salary threshold for overtime protections. Hughes has said about 50,000 Arkansans would be guaranteed overtime protection once the now-postponed rules go into effect.

“This not only helps Arkansas workers, but this extra money in their pocket will also be put right back into the Arkansas economy. Some of our workers live from paycheck to paycheck and this is a step back from where the (overtime rules) ought to be,” said the union chief.