A federal judge blocked President Barack Obama’s signature overtime rule, which would have extended overtime pay to over 4 million Americans.
Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued a preliminary injunction Nov. 22, temporarily blocking the Dec. 1 implementation of Obama’s new rules.
The injunction means the judge found the 21 states and business groups (plaintiffs) suing to block the rule have a substantial likelihood of success, and the plaintiffs would suffer irreparable harm if the injunction was not granted.
The 21 states and dozens of business groups asserted that the new rule would increase government costs by hundreds of millions of dollars and cost private employers millions. The judge, by issuing the injunction, agreed with these assertions.
The rule, championed by Obama’s Department of Labor (DOL), would raise the salary threshold for workers to qualify as exempt from overtime pay from $455 to $913 per week (or from $23,660 to $47,476 per year).
Congress enacted the Fair Labor Standards Act (“FLSA”) in 1938, requiring that employees receive no less than the federal minimum wage, which is currently $7.25 per hour and entitled employees to overtime pay at 1.5 times the employee’s regular pay for all hours worked in excess of 40 hours in any one week. The FLSA specifically exempted, “bona fide executive, administrative, or professional capacity,” from the overtime requirements, in what is referred to as the “EAP” exemption.
The FLSA did not define the terms “bona fide executive, administrative, or professional capacity,” which effectively gave the secretary of labor the power to define the terms through regulations and rule-making.
Congress delegated the secretary of labor with the power to define the terms through regulations, which as of 2004, require an employee to meet three criteria to qualify for exemption. The employee must be paid on a salary basis, the employee must be paid at least the minimum salary level established by the regulations and the employee must perform executive, administrative, or professional duties (the “duties test”), according to the criteria.
In March, 2014, Obama issued a memorandum directing the secretary of labor to “modernize and streamline the existing overtime regulations for executive, administrative, and professional employees.”
Obama asserted that the regulations regarding overtime requirements for, “executive, administrative, and professional employees” have not kept up with the “modern economy.”
The DOL issued the new overtime rule, and set Dec. 1, 2016 as its implementation date. The new regulation would add 4.2 million new workers to overtime payrolls, something business groups vehemently opposed, according to the DOL.
The judge ruled that while the FLSA gives the DOL significant leeway to establish the types of duties that might qualify an employee for the exemption, nothing indicated that Congress intended the DOL to define a minimum salary level.
The judge ruled that the DOL “exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level,” meaning that the Final Rule is unlawful.
“The DOL’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 DOL, should make that change,” the judge said in his ruling. The decision puts the president’s signature labor regulation in serious doubt.
The Department of Justice asked Mazzant to at least let the new rule take effect in the 29 states that didn’t sue to update salary triggers. The federal government argued that rising wages and “broad workplace definitions” of what constitutes white-collar jobs have “left employees who should not be exempt without overtime protection.”
Mazzant rejected the federal government’s request to limit the injunction to the states that filed the lawsuit. The DOL failed to consider regional salary and economic differences in setting the nationwide base pay rate, opponents to the new rule had argued.
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