Federal Judge Halts DOL Overtime Rules

A federal judge is Texas recently granted a preliminary injunction in a lawsuit challenging the Department of Labor’s (DOL) new overtime rules. The overtime rule decision applies nationwide. For now, New Jersey municipalities should continue to use the old salary thresholds for determining when employees must be paid overtime wages. Federal Judge Halts DOL Overtime Rules

DOL’s New Overtime Rule

As previously discussed on the Scarinci Hollenbeck Government & Law Blog, a coalition of 22 states and more than 50 business groups filed a lawsuit challenging the DOL’s new overtime rules, which were slated to take effect on December 1, 2016. The lawsuit raised several legal claims, including that the DOL exceeded its authority and that mandating that states pay overtime to state employees is unconstitutional.

The new overtime rule raises the thresholds used to determine whether executive, administrative, and professional employees (frequently referred to as “white collar workers”) are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (FLSA). Under the new rule, the salary threshold increases from $455 a week ($23,660 for a full- year worker) to $913 a week ($47,476 for a full-year worker). Going forward, the Final Rule also allows the salary levels to be automatically adjusted every three years.

Preliminary Injunction Blocks Implementation

On November 22, 2016, U.S. District Judge Amos Mazzant granted the plaintiffs’ request for a preliminary injunction. He concluded that the plaintiffs had a strong likelihood of proving their claims and would suffer irreparable harm if the overtime rule took effect prior to the conclusion of the legal proceedings. Judge Amos also found that the DOL would not suffer if the implementation of the new rule was delayed.

With regard to the plaintiffs’ arguments, Judge Mazzant concluded that the states were unlikely to succeed in proving their constitutional arguments. However, he did find that the rule violates the FLSA by imposing specific salary level requirements rather than focusing on the duties of the employees.

As Judge Mazzant acknowledges, the DOL is authorized under the FLSA to establish the types of duties that might qualify an employee for the overtime exemption. However, he further notes that the statute “does not indicate that Congress intended the Department to define and delimit with respect to a minimum salary level.” As further explained in the opinion:

With the Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.4 Consequently, the Final Rule does not meet Chevron step one and is unlawful.5 The Department’s role is to carry out Congress’s intent. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.

The DOL is likely to appeal the court’s ruling to the Fifth Circuit Court of Appeals. While New Jersey municipalities need not comply with the new overtime rules at this point, they should continue to follow the legal developments in this case.

For more information about the DOL’s overtime rule or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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