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Texas Judge Grants Injunction, Delaying New Overtime Rule

In a surprise ruling, a federal district judge in Texas has chosen to issue an injunction that will postpone the Obama Administration’s expansion of overtime rights to over 4 million currently-ineligible salaried workers.

Texas Court Puts Hold On Overtime Expansion

Judge Amos L. Mazzant, an Obama appointee, announced his decision on Tuesday, November 22, 2016, just eight days before the Labor Department’s new guidance was scheduled to take effect.

Update September 7, 2017 – Federal Judge Strikes Down Overtime Rule

Judge Amoz Mazzant has now gone beyond postponing former-President Obama’s new overtime rule. In an opinion issued on August 31, 2017, Judge Mazzant invalidated the rule, saying the Labor Department had exceeded Congressional intent in trying to double the overtime threshold for salaried employees. And President Trump’s labor officials have no intention of appealing the decision. That means, at least for the foreseeable future, American workers shouldn’t expect any expansion of their overtime rights.

A pillar of President Obama’s labor agenda, the proposed rule sought to increase a key salary threshold for overtime eligibility. Currently, salaried workers who make at least $23,660 per year and meet a duties test are ineligible for overtime pay. Obama’s rule would have doubled the threshold to $47,476 per year, while keeping the duties test intact. The Department of Labor estimated that around 4.2 million workers would have automatically become entitled to overtime wages.

Office Worker

The Obama Administration’s rule was challenged by a number of state governments, including Texas, Alabama and Arizona, along with numerous business organizations and the US Chamber of Commerce. With Judge Mazzant’s ruling now in the books, millions of workers who could have become entitled to overtime have been left “in limbo,” the Washington Post writes.

Some Employers Move For Compliance Anyway

Judge Mazzant’s ruling is not an all-out death sentence for the Obama Administration’s contentious labor rule. The preliminary injunction will only put a pause on the rule’s implementation, allowing the court additional time to consider the proposal’s legal foundations.

Indeed, some employers have announced plans to remain in compliance with the new regulations, whether or not they ever come into effect. The National Institutes of Health, for example, says it will raise salaries for biomedical postdoctoral candidates, Science reports, bumping postdocs over the proposed salary threshold of $47,476. Likwise, Walmart raised the salaries for entry-level managers in September, an attempt to avoid paying overtime. Whether or not these moves toward compliance will be withdrawn in the future is uncertain.

Few pundits expected the overtime expansion to be postponed at all, however. The Labor Department, which says the rule was “the result of a comprehensive, inclusive rule-making process,” is confident in the increase’s legality. Judge Mazzant, on the other hand, says the federal agency exceeded the authority delegated to it by Congress.

Why Judge Mazzant Ruled Against Overtime Rule

In their lawsuit, the States argue that Obama’s update of the overtime regulations is in violation of the Constitution, since it would “coerce” state governments into adopting wage policies contrary to their priorities (like being able to set their own wage levels for government employees). Judge Mazzant rejects this argument, noting that Supreme Court precedent allows the Labor Department to “impose” Fair Labor Standards Act requirements, including newly-instituted regulations, onto state and local employers.

Mazzant also dismisses an alternative line of reasoning, in which the States contend that FLSA guidelines shouldn’t apply to them at all due to the “clear statement rule.” In American jurisprudence, Courts are restricted from interpreting laws in an overly-broad manner. In essence, the idea is that, if Congress wanted a particular outcome, they would have made that painstakingly clear in the language of the law. As Judge Mazzant writes, Congress did make it clear that the Fair Labor Standards Act applies equally to private and public employees. The law controls wages for any worker “employed in an enterprise engaged in commerce or in the production of goods for commerce,” enterprises that include the “activit[ies] of a public agency.”

A Question Of Definitions

Judge Mazzant turns next to a common question in matters of legal interpretation: what did Congress intend, when it wrote the Fair Labor Standards Act, by using the terms “executive,” “administrative” and “professional”? These are the three types of workers who can be considered exempt from overtime requirements, under what are commonly termed “white collar” exemptions. But the law itself does not provide a definition for any of the terms.

This isn’t out of the ordinary. When a law doesn’t provide its own definitions, courts turn to a dictionary to determine a word’s “plain meaning at or near the time the statute was enacted.” Where “executive,” “administrative” and “professional” are concerned, the Oxford English Dictionary published in 1933, five years before the Fair Labor Standards Act was passed, defines all three words in terms of a worker’s “performance, conduct, or function,” Mazzant writes. There’s no suggestion, at least in the dictionary, that being an “executive,” “administrator” or “professional” implies a certain salary level.

Along these lines, Judge Mazzant reasons that Congress intended for the “white collar” exemptions to take an employee’s duties into account, rather than how much they make. The Labor Department has an answer for this objection, arguing that, while a worker’s duties are certainly important, being a “white collar” employee also carries an implication of social status, which as we all know, is largely tied to one’s income. Judge Mazzant finds this argument unconvincing.

In writing the Fair Labor Standards Act, Mazzant says, Congress gave the Department of Labor authority to redefine the duties entailed by the definitions of “executive,” “administrator” and “professional,” “because an employee’s duties can change over time.” On the issue of salaries, however, Congress was silent, insofar as the dictionary definitions of these terms imply nothing about a salary. That silence, according to Judge Mazzant, severely limits the Labor Department’s authority to set federal salary thresholds for overtime exemptions. In attempting to double the salary threshold, the Department of Labor clearly exceeded its Congressionally-delegated authority, Mazzant writes.

Why Do We Have A Salary Threshold At All?

Judge Mazzant’s other problem with the Labor Department’s rule relates specifically to the salary threshold’s function. As the Judge writes in his Court Order, the original salary threshold, $23,660 per year, was set at a low level on purpose. The idea, according to Mazzant, was to immediately screen out workers making very low salaries, people who should “obviously” be entitled to overtime pay. Above the threshold, on the other hand, the duties test controls who deserves overtime and who does not.

On Judge Mazzant’s interpretation, doubling the threshold puts too much authority into the salary test’s hands, while disregarding the duties test. In other words, setting the salary threshold at a very high level is against the salary threshold’s original intention, which was to screen out low-income salaried workers and make them automatically entitled to overtime, regardless of job duties.

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