Why Did Judge Immediately Halt the New Overtime Rule?

Three regulations issued by the Department of Labor (DOL) have been blocked by the courts in the past month.

The latest regulation was the final rule issued by the DOL in May doubling the weekly threshold for salaried workers exempt from overtime pay under the Federal Labor Standards Act to $47,476 annually. The regulation was set to take effect Dec. 1 and included an indexing formula that raised the threshold every three years without another rule-making.

In general, businesses are required to pay overtime for specific classes of specially protected workers (i.e. low wage, demanding physical labor, etc.)who work more than 40 hours a week. Congress however exempted, “any employee employed in a bona fide executive, administrative, or professional capacity.” The Labor Department has traditionally used a ‘duties test’ to determine exempt workers. The agency proposes to now employ a secondary salary test to help businesses screen out nonexempt workers. Employees that earned less than $23,660 annually—the threshold set in 2004—were unlikely to be engaged in executive or administrative duties.

Many workers earning less than the new $47,476 threshold perform duties—such as fast-food manager or a starting accountant—are also likely to be involved in executive or administrative duties. The DOL estimated that 4.2 million workers and the businesses they work in would be affected under the new labor standard without their duties changing.

Business groups and 21 states sued, arguing that the rule would raise government costs by $115 million. In preparation for new rule implementation, employers have been reclassifying workers, in some cases capping hours, hiring more part-time workers and shifting duties to those that are professionals in the context of their job responsibilities.

U.S. District Court Amos Judge Mazzant noted that the, “significant increase to the salary level creates essentially a de facto salary-only test.” This exceeds DOL’s, “delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.” He determined the rule was, “directly in conflict with Congress’s intent.”

The judge issued a temporary injunction for all 50 states because, “the scope of the alleged irreparable injury extends nationwide.”

For more detailed information on this ruling, please see the following documents:

  1. Complaint Filed to U.S. District Court
  2. Injunction Imposed by U.S. District Court
  3. District Court Judge's Official Ruling


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