Another Ruling on the Overtime Rules

In a very anticlimactic opinion, a federal trial judge in Texas formally invalidated the Obama Administration’s new overtime rules.

Wait. I Thought That Already Happened.

Previously, Judge Amos Mazzant of the United States District Court for the Eastern District of Texas had entered an injunction, which stayed the implementation of the overtime rules. The new overtime rules were to more than double the minimum salary required to be paid to salaried employees. That injunction is now before the Fifth Circuit. 

Now What?

On August 31, Judge Mazzant simply put a period on the end of the sentence. His previous order was an injunction. On August 31, he granted a Motion for Summary Judgement that had been filed by the business community. His order formally invalidated the regulations. According to the opinion, “The Final Rule more than doubles the Department’s previous minimum salary level, increasing it from $455.00 per week ($23,660.00 annually) to $913.00 per week ($47,476.00 annually). This significant increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” Judge Mazzant said that “[t]his is not what Congress intended” when passing the white collar exemptions to the Fair Labor Standards Act. Judge Mazzant said that the Department of Labor “has exceeded its authority and gone too far with the Final Rule.”

What Happens Next?

It is grossly unclear. We are in uncharted waters. The preliminary injunction is currently pending before the Fifth Circuit. It is possible that the Court of Appeals could say that the injunction is now moot because the trial judge has ruled on the merits of the case. 

This would buy the Trump Administration some time. The new leadership at the Department of Labor is interested in promulgating its own regulations, which will likely raise the salary basis to a level higher than the previous regulations but lower than the Obama Administration hoped.

Alternatively, the Fifth Circuit could simply go ahead and rule on the injunction. If it does this, its opinion could be inconsistent with the lower court’s opinion. For example, the Fifth Circuit could hold that the lower court erred when it said that the Department of Labor did not have the authority to set a minimum salary. This would effectively invalidate the August 31 ruling.

There are certainly other possibilities. Anything you read about the next step would be purely speculation. 

What Should I Do Now?

For now, employers should maintain the status quo. There is simply too much uncertainty in wage and hour law to make any changes at this time. We do not know what the Fifth Circuit will do with the pending litigation. It may end up in the Supreme Court. Likewise, the U.S. Department of Labor has already taken the first steps in the rule making process, which will likely result in new regulations related to the white collar exemptions. For the time being, employers will be well advised to maintain the status quo, so long as they are complying with the regulations that existed prior to the 2016 Amendments.