Federal Judge Invalidates Obama-Era Rule on Overtime Pay

A federal judge in Texas yesterday overturned the Obama administration’s final rule doubling the salary level used to determine whether employees are classified as exempt from overtime under the Fair Labor Standards Act. The rule — which would more than double the salary level for exemptions from $23,660 to $47,476, regardless of whether the employee would qualify for exemption under the test of “executive, administrative or professional” duties — has been prevented from taking effect for nearly nine months pending litigation.

District Judge Amos Mazzant has now granted summary judgment for the plaintiffs in a lawsuit brought by 21 states and several business groups, invalidating the final overtime rule. It remains to be seen whether the Department of Labor will appeal the ruling; under the Trump administration, Labor Secretary Alex Acosta was expected to revisit the overtime rule and is currently seeking public comments on its projected impact.

Mazzant ruled that in doubling the salary test, the Obama administration’s interpretation of the FLSA was not “reasonable” and therefore not warranting the “deference” otherwise shown by courts to regulatory actions under the Chevron precedent. “The Department has exceeded its authority and gone too far with the Final Rule,” he ruled. “Nothing in [FLSA] Section 213(a)(1) allows the Department to make salary rather than an employee’s duties determinative of whether a ‘bona fide executive, administrative, or professional capacity’ employee should be exempt from overtime pay.”

The American Bankers Association, among others, has frequently pointed out that in many parts of the country, many managers will be swept up by the overtime rule’s unnecessarily high salary levels. When the rule was finalized, ABA President and CEO Rob Nichols commented that “throngs of employees across the country, especially those at small banks and branches where a handful of employees wear many hats, will face reduced opportunity and flexibility in the workplace.” For more information, contact ABA’s Cris Naser.