Risk & Compliance

Court Blocks Obama’s Expansion of Overtime

The Labor Department exceeded its authority in raising the minimum salary level for overtime eligibility, a Texas judge rules.
Matthew HellerNovember 25, 2016
Court Blocks Obama’s Expansion of Overtime

A Texas judge has halted enforcement of a new rule that would  qualify millions more workers for overtime pay, finding the Labor Department exceeded its authority in increasing the minimum salary level for eligibility.

The rule — a signature Obama administration initiative to expand the middle class — was set to go into effect Dec. 1, but U.S. District Judge Amos L. Mazzant on Tuesday granted a preliminary order enjoining its implementation.

The order had been sought by 21 states that filed suit to challenge the rule, arguing the administration improperly raised the salary cap below which all workers must receive overtime pay from $455 a week to $921 a week, or $47,892 a year.

The Labor Department “exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test” for eligibility, Mazzant concluded in his ruling.

The duties, or “white-collar,” test exempts “any employee employed in a bona fide executive, administrative, or professional capacity” from receiving overtime pay.

According to Mazzant, the new rule’s “significant increase to the salary level creates essentially a de facto salary-only test,” making about 4.2 million workers who now fall below the threshold automatically eligible for overtime without a change to their duties.

“Congress did not intend salary to categorically exclude an employee with [executive, administrative, or professional] duties from the exemption,” the judge said.

The business community, which also challenged the rule, applauded the ruling. “The rules are just plain bad public policy, and we are pleased that the judge is allowing time for the case to go forward before they can go into effect,” David French, a spokesman for the National Retail Federation, said.

Any permanent injunction would await a trial on the merits of the case, but Mazzant indicated the plaintiffs had shown a “substantial likelihood of success.”

“We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” the Labor Department said.