On October 30, 2017, the United States Department of Labor (DOL) appealed an August 31, 2017 ruling by United States District Judge Amos Mazzant, III, which struck down a controversial Obama-era overtime rule that would have made as many as 4 million more workers eligible for overtime pay. The appeal – which is being accompanied by a request for a stay pending the issuance of a new overtime rule – appears to be an effort to protect the DOL’s authority to set a lower salary threshold for overtime exemption. While the Trump administration is no longer backing the Obama-era proposal to hike the overtime threshold to over $47,000, Labor Secretary Alexander Acosta has signaled that he might be comfortable with a salary threshold in the low $30,000 range, to account for inflation since the rule’s last update in 2004.
The DOL’s ability to set a salary threshold for overtime exemption was first thrown into doubt in November 2016, when Judge Mazzant (an Obama appointee) issued a preliminary injunction blocking the implementation of the Obama-era rule, which would have increased the threshold for overtime-exempt employees from $455 per week (or $23,660 annually) to $913 per week (or $47,476 annually), as well as the overtime eligibility threshold for highly compensated workers from $100,000 to approximately $134,000, and created an index for future increases. The Obama administration appealed Judge Mazzant’s ruling shortly before President Trump was sworn in, and the Trump DOL filed a brief in June 2017 advising that, while it was not seeking to reinstate the Obama-era salary level, it nevertheless wanted the Fifth Circuit Court of Appeals to overturn Judge Mazzant’s finding that the agency lacked authority to use a salary test. While that interlocutory appeal was pending, Judge Mazzant entered final judgment against the DOL on August 31, finding the salary-level test used by the DOL in this instance was unlawful, given the overtime eligibility test established by Congress, which focuses on a worker’s duties. Following Judge Mazzant’s decision entering final judgment striking down the rule in August, the DOL dismissed its interlocutory appeal in September 2017.
The Trump administration has otherwise begun the process of writing a new overtime rule, which had last been updated in 2004. The DOL took the first steps towards issuing a revised overtime rule in July 2017, issuing a Request For Information (RFI) that sought public input on eleven separate topics, including the methodology used to calculate the salary level and the FLSA’s duties test for overtime exemption. While the DOL is still reviewing the 165,000 comments received in response to the RFI, Labor Secretary Alexander has generally suggested that the DOL may be willing to issue a rule with a more moderate salary increase, in the low $30,000 range.
By way of this new appeal of Judge Mazzant’s final order, it is clear that although the Trump administration disagrees with the Obama administration regarding how much the salary basis should be increased, they nevertheless do not wish to have a court order in place telling them they do not have the power to issue such a rule. In this regard, the DOL has indicated that it will ask the Fifth Circuit to stay the case as soon as the appeal is docketed, while the agency issues a new rule. Once a new overtime rule is issued, it is expected that DOL will seek a ruling vacating or mooting Judge Mazzant’s August 2017 decision, such that there would no longer be a ruling that limits DOL’s authority. However, it is not clear whether the Fifth Circuit will permit the case to be stayed, in which case the DOL would need to argue whether or not they have the authority to issue a salary threshold for overtime exemption. Additionally, the AFL-CIO has appealed Judge Mazzant’s denial of its motion to intervene, which (if overturned) could allow it to argue for reinstatement of the Obama overtime rule.
Phelps Dunbar will continue to monitor the appeal, as well as the Trump administration’s efforts to issue a new overtime rule, and will provide regular updates regarding the same.