02 Dec Texas Judge Blocks Obama Administration Rule Extending Overtime Pay to 4.2 Million U.S. Workers

Obama- appointed U.S. District Judge Mazzant in Nevada v. United States Dep’t of Labor, No. 4:16-CV-00731, 2016 WL 6879615 (E.D. Tex. Nov. 22, 2016), recently blocked an Obama administration rule to extend mandatory overtime pay to more than 4 million U.S. workers.  This decision could put in jeopardy one of President Obama’s signature achievements for increasing wages.  Obama has been unable to persuade Congress during his presidency to increase the minimum wage from $7.25 per hour.

The judge granted a motion for a nationwide injunction, filed by 21 states and a coalition of business groups in September, including the U.S. Chamber of Commerce, which claimed the drastic increase in the salary threshold was arbitrary.  The judge found the rule was unlawful, as the Department exceeded its delegated authority and ignored Congress’s intent where it was the “Department’s role [] to carry out Congress’s intent.”   See 2016 WL 6879615.   The Labor Department was not allowed to decide which workers are eligible based on salary levels alone.  The Fair Labor Standards Act says that employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule “creates essentially a de facto salary-only test,” Judge Mazzant wrote in the 20-page ruling.

Although the injunction is only temporary, the ruling is an indication as to the judge’s likelihood to side with 21 state attorneys general and business groups that sued to block the regulation.

The rule was issued by the Labor Department and was to take effect Dec. 1, 2017.  If the rule stood, it would have doubled the maximum salary a worker can earn and still be eligible for mandatory overtime pay.  Such a rule would have touched every sector of the U.S. economy, with the greatest impact on nonprofit groups, retail companies, hotels and restaurants.  These sectors have many salaries which are below the new threshold.

The Labor Department strongly disagreed with the decision and is currently considering its options, while Nevada Attorney General Adam Paul Laxalt stated the ruling “reinforces the importance of the rule of law and constitutional government.”  The U.S. Chamber of Commerce stated that the rule would have been costly and disruptive to businesses.

The Labor Department can appeal to the 5th U.S. Circuit Court of Appeals, but it might be a moot point, as that court blocked Obama’s executive actions on immigration in 2015.

Some question whether the Labor Department will dismiss the appeal after President-elect Donald Trump takes office in January.  In August, Trump told the website Circa that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president.  Even if the rule survived the lawsuit, it could be upended by legislation passed by Congress or withdrawn by Trump’s Department of Labor.

Liberal groups were quick to denounce the decision.  Ross Eisenbrey, vice president of the left-leaning Economic Policy Institute, said “this is an extreme and unsupportable decision and is a clear overreach by the court.”  Eisenbrey helped the Labor Department develop the regulation.  Eisenbrey called it “a disappointment to millions of workers who are forced to work long hours with no extra compensation” and “a blow to those Americans who care deeply about raising wages and lessening inequality.