Sudden Death for Obama OT Rules

Trump drops appeal for regulation that would have doubled threshold for white collar overtime pay

Donald Trump
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June 30, 2017

The Trump administration will not defend President Obama's proposed regulations that would have doubled the threshold at which companies must pay white collar workers overtime.

On Friday the Department of Labor announced that it would not appeal a temporary injunction that blocked it from enforcing regulations that would have forced companies to grant overtime to any employee earning less than $913 a week, double the existing baseline of $455. A federal judge appointed by President Obama blocked the regulation in November, saying that the department misinterpreted Congress's intention for overtime rules set forth in the Fair Labor Standards Act.

"Congress intended the EAP [executive, administrative, or professional] exemption to depend on an employee's duties rather than an employee's salary," Judge Amos Mazzant said in the ruling. "Nothing in the EAP exemption indicates that Congress intended the Department to define and delimit with respect to a minimum salary level."

Obama called on the department to draft new overtime regulations in a 2014 executive order—the same year he appointed Mazzant to the Eastern District of Texas court—and the department released its final rule in May 2016. The published rule inspired immediate backlash from several states and industry groups that challenged the change. The rule was set to go into effect in December 2016 before Judge Mazzant granted the injunction. The department appealed Mazzant's ruling immediately, but was granted multiple extensions in order to accommodate the new administration. It ultimately decided to drop the appeal, which will prevent the rule from going into effect.

The business community and labor watchdogs welcomed the Trump administration's push to abandon the legal challenge.

Angelo Amador, executive director of the Restaurant Law Center, said that the Labor Department's proposal went beyond the scope of its authority and would have led to economic decline had it been enforced.

"The Obama administration had a drastic and illegal overreach in its overtime regulatory proposal and ignored the warnings from the stakeholder community in charge of implementing it," he said. "If it had been allowed to move forward, it would have had a terrible impact on small businesses and their workers."

On Tuesday, the Labor Department sent an information request to the Office of Management and Budget on overtime policy, opening a public comment period and hinting that the administration intended to launch its own proposed regulations. Trey Kovacs, a labor expert at the pro-free market Competitive Enterprise Institute, called the Obama standards a "job-killing mandate" and said the department's request would led to a "new, less onerous rule."

"If implemented, the overtime rule would have forced employers to face tough decisions on how to cut labor costs in order to afford the rule’s huge costs and paperwork burden. Instead of getting a pay increase, most workers would have seen their hours cut, flexible work arrangements eliminated, benefits reduced, and diminished prospects for promotion," Kovacs said in a release. "The way to help workers increase financial security and improve job opportunities is to lift heavy-handed government mandates off of America’s job creators."

A DOL spokesman declined comment, instead referring to the brief filed by the department. DOL attorneys disputed the notion that regulators could not take salary levels into account when shaping overtime rules even as they declined to defend the Obama administration proposals.

"This Court should simply lift the cloud created by the district court’s broad reasoning, which would call into question any salary-level test adopted by the Department," the brief said. "The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be."

Update 12:27 p.m.: This post has been updated to reflect comment from DOL attorneys.