The Justice Department will no longer fight to preserve President Barack Obama's attempted overtime hike that a federal judge declared invalid in August.
The department will not pursue an appeal challenging Judge Amos Mazzant's decision to strike down the Obama White House's attempt to double the threshold at which companies must pay white collar workers overtime. The decision, first reported by Bloomberg, brings to an end one of the most controversial regulatory decisions from the Obama era, though Trump Labor Secretary Alexander Acosta has said he is open to reviewing existing regulations.
Mazzant, an Obama appointee to the bench, issued a preliminary injunction preventing the new rules from going into effect in November 2016. On August 31, he delivered a final decision on the matter declaring the rules invalid. Mazzant ruled that the Labor Department "exceeded its authority" by focusing on salary levels, rather than workers' duties, to justify its expanded coverage. He also said the agency improperly established automatic three-year hikes to the threshold.
"Congress was clear that the determination should involve at least a consideration of an employee’s duties," Amos said in the ruling. "The Department has exceeded its authority and gone too far with the Final Rule. Nothing in [the law] allows the Department to make salary rather than an employee’s duties determinative."
The new department rules would have forced companies to provide overtime payments to any white collar or administrative worker earning below $47,476 in salary—more than twice as high as the existing $23,660 threshold—a move that would have affected around 4.2 million American workers, according to agency estimates. The rule sparked a legal challenge from a number of industry groups, businesses, and state governments, which claimed the agency overstepped Congress's intended interpretation of administrative employees. Mazzant agreed, calling the final rule "unlawful" because it extended benefits to specific classes of workers Congress had exempted from overtime considerations, but he rejected the state government's argument that the federal standards infringed on 10th Amendment states rights.
"Because the Final Rule would exclude so many employees who perform exempt duties, the Department fails to carry out Congress’s unambiguous intent," the ruling said.
The department had asked Mazzant to allow a salary threshold to play a role in future rulemaking. Legal observers said the ruling does leave wiggle room for the agency to use such a standard moving forward, albeit at lower levels than the massive hike envisioned by the Obama administration.
"Judge Mazzant’s ruling yesterday should give the DOL time to do what it says it wants to do in terms of opening new rulemaking and setting a salary level somewhere between the current $455/week and the $913/week that was set in the Obama Administration rule," said the legal team at management-side firm Constangy, Brooks, Smith, & Profete in a September 1 client bulletin. "Many believe, based on comments from Secretary of Labor Alexander Acosta, that the Trump DOL is likely to set a minimum salary level in the $650-$700/week range, which would be roughly between $34,000 and $36,000, annualized."
Industry groups applauded the DOJ's decision. Angelo Amador, executive director at Restaurant Law Center, said the Trump administration should start a fresh approach to potential hikes by including businesses in the discussion of appropriate exemption levels.
"The Obama administration’s drastic changes to the federal overtime rule would have hurt small businesses and their employees," Amador said in a statement. "We applaud DOJ’s decision to ask for a dismissal of the appeal. This will allow the U.S. Department of Labor time to consider input from the business community to enact workable changes to these regulations."
Employers and other interest groups have until September 25 to submit any comments relating to potential overtime regulation changes under a 60-day request for information period launched by DOL in July.