On August 31, 2017, a Texas federal judge struck down the Obama administration’s controversial DOL Overtime Rule. The judge concluded that the DOL “exceeded its authority and had gone too far with the final rule.”
In March 2014, then President Obama sent a memorandum directing the Secretary of Labor to “modernize” and “streamline” the existing overtime regulations for executive, administrative, and professional (“EAP”) employees. In response, the DOL initiated the process of creating a new overtime rule. The resulting Final Rule raised the minimum salary threshold for “EAP” workers from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) and for “highly compensated employees” from $100,000 to $134,000.
Several states and business groups challenged the rule in federal courts in Nevada and Texas. The cases were consolidated before the same federal judge in Texas. On November 22, 2016, the Texas judge issued a preliminary injunction preventing the rule from taking effect. The Obama administration appealed the injunction ruling to the Fifth Circuit Court of Appeals before President Trump was sworn in. The DOL recently moved to withdraw its appeal in light of the federal judge’s ruling.
The Texas judge concluded that the DOL had exceeded its authority by creating a salary level requirement that essentially eliminated the job duties test. He held that the while the DOL has broad authority to define and delimit the EAP exemptions, this authority is limited by the plain meaning of the words of the statute and Congress’s intent The judge stated that, “the Department does not have the authority to use a salary-level test that will effectively eliminate the duties test… [n]or does the Department have the authority to categorically exclude those who perform ‘bona fide executive, administrative, or professional capacity’ duties based on salary level alone.” In reaching this conclusion, the judge noted that the proposed rule would have automatically made 4.2 million workers eligible for overtime without a change to their job duties.
Impact for Employers
The overtime rule is invalidated for now. However, Labor Secretary Alexander Acosta stated during his confirmation hearings that the Obama-era increase was far too high but that the salary threshold should be increased to somewhere between the proposed salary level and the current level. In July 2018, Secretary Acosta followed up on this statement and issued a request for information inviting public feedback on ways to revise the Obama administration’s rule. We will keep you posted on important developments as they occur.