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Texas court kills Obama DOL overtime rule

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Big news on the Department of Labor overtime rule front! On Aug. 31, U.S. District Court Judge Amos Mazzant granted the motion for summary judgment of various business groups and state attorneys general in the overtime rule case.

Previously, on Nov. 22, 2016, Judge Mazzant issued a nationwide injunction, preventing the implementation of the rule, pending a decision on the merits of the case. The injunction case is before the U.S. Court of Appeals for the Fifth Circuit. It has been fully briefed and is currently scheduled for oral argument before the court on Oct. 3.

There is much speculation that oral argument may not occur, and the DOL may withdraw the appeal, given the Aug. 31 decision of Judge Mazzant granting the motion for summary judgment, which ruled that the final rule was unlawful.

Significantly, Judge Mazzant also rejected a request by the Texas AFL-CIO to intervene in the case, with the hope of fighting to save the Obama rule.

The Aug. 31 Decision
The court analyzed Section 213(a)(1) of the Fair Labor Standards Act, which provides, "Any employee employed in a bona fide executive, administrative, or professional capacity ... as such terms are defined and delimited from time to time by regulations of the Secretary shall be exempt from minimum wage and overtime requirements."

The court examined the plain meaning of these terms and decided that it was clear that Congress defined the exemptions with regard to duties. In other words, Congress unambiguously intended the exemption to apply to employees who perform "bona fide executive, administrative, or professional capacity" duties. It was Congress' intent that employees doing "bona fide executive, administrative, or professional capacity" duties be exempt from overtime pay.

The court then considered whether the DOL, in its new overtime rule, gave effect to the intent of Congress. The court noted that it was not "making any assessments regarding the general lawfulness of the salary level test or the department's authority to implement such a test." Rather, the court evaluated only the salary level test as amended by the DOL's final rule.

The court said:

  • The DOL does not have the authority to use a salary level test that will effectively eliminate the duties test as described by Section 213(a)(1).
  • The DOL does not have the authority to categorically exclude those who perform "bona fide executive, administrative, or professional capacity" duties based on salary level alone. The DOL admitted that it lacked the authority to adopt a salary-only test for exemption.
  • The DOL acknowledged that any new figure should be somewhere near the lower end of the range of prevailing salaries.
  • The final rule more than doubles the previous minimum salary level.

The court then found that the final rule makes overtime status predominately dependent on a minimum salary level – thereby supplanting an analysis of an employee's job duties. Because the final rule would exclude an estimated 4.2 million workers who perform exempt duties, the DOL rule fails to carry out the unambiguous intention of Congress.

Next, the court found that the DOL's final rule is not "based on a permissible construction" of Section 213(a)(1). The final rule more than doubles the previous minimum salary level. By raising that salary level in this manner, the DOL effectively eliminates a consideration of whether an employee performs "bona fide executive, administrative, or professional capacity" duties.

Finally, the court stated that the final rule was not reasonable:

"The Department has exceeded its authority and gone too far with the Final Rule. Nothing in Section 213(a)(1) allows the Department to make salary rather than an employee's duties determinative of whether a 'bona fide executive, administrative, or professional capacity' employee should be exempt from overtime pay."

This is great news for the business community! New Secretary of Labor Alex Acosta is already soliciting comments in anticipation of promulgating a new proposed rule once the litigation is resolved. Look for the promulgation of a new proposed rule that would establish a new salary threshold in the $32,000-$33,000 range. 

L. Michael Zinser is the founding partner of The Zinser Law Firm in Nashville, Tenn. The firm, which has a heavy concentration of clients in communications media, represents management in the area of labor and employment. Zinser can be reached at (615) 244-9700 or mzinser@zinserlaw.com.

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