Federal Judge Strikes Down Obama Administration Overtime Rule

On Thursday, August 31, 2017, a federal judge struck down the Obama administration’s controversial rule that would have expanded overtime eligibility to more than 4 million U.S. workers. The rule, which was challenged by 21 states and more than 55 business groups, came before Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas in the case of State of Nevada et. al. v. U.S. Department of Labor et. al., 4:16-cv-00731.

The rule would have raised the minimum threshold required to qualify for the Fair Labor Standards Act (“FLSA”) “white collar” exemption to just over $47,000 per year, roughly double the threshold currently in place. The rule would also increase the overtime eligibility threshold for “highly compensated” workers from $100,000 to approximately $134,000.

The rule was originally set to take effect on December 1, 2016, but business groups and 21 states filed suit, challenging the rule. Judge Mazzant issued an injunction in November 2016, pending his final decision.

On Thursday, Judge Mazzant granted summary judgment to the challengers of the rule, stating that the “significant increase” of the salary thresholds would essentially render meaningless the duties, functions, or tasks that an employee performs if their salary falls below the new minimum salary level. Judge Mazzant explained: “The Department creates a final rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. Because the final rule would exclude so many employees who perform exempt duties, the Department fails to carry out Congress’ unambiguous intent” Therefore, “the Department has exceeded its authority and gone too far with the rule”.

Employers and pro-business organizations are praising this move as many small business would have faced dramatic labor cost increases from the doubling of the overtime salary threshold.

We will provide updates as this matter further unfolds. If you have any questions about the FLSA’s overtime regulations or other compliance matters, please contact one of our employment attorneys for assistance. Stites & Harbison assists clients of all sizes, including publicly traded corporations, privately held companies, and small businesses alike.