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The litigation over the Obama administration's overtime rule should be paused while the Department of Labor (DOL) develops a new rule, according to an appeal with the 5th U.S. Circuit Court of Appeals and motion to stay that the department announced Oct. 30.
The Obama administration issued a Fair Labor Standards Act rule in 2016 that would have raised the salary threshold for exempt workers from $23,660 to $47,476. Twenty-one states, the U.S. Chamber of Commerce and other business groups challenged the rule, which was scheduled to take effect Dec. 1, 2016.
Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas blocked the rule in a Nov. 22, 2016, decision. Since then, there has been widespread speculation about how the Trump administration would treat this decision, which the Obama administration appealed to the 5th U.S. Circuit Court of Appeals. But the new administration has indicated that it is considering issuing a new overtime rule that would have a more modest salary threshold increase.
In August, Mazzant granted summary judgment to the business groups challenging the Obama administration's rule, declaring the rule invalid. The DOL had asked the 5th Circuit to dismiss its pending appeal of the November 2016 injunction on Sept. 5 of this year, which was granted Sept. 6. Now it is appealling the August decision and asking the appeals court to place the litigation on hold.
Court's Troublesome Reasoning
"Even the new administration has to be concerned about Mazzant's reasoning that the statute does not permit a salary-level test at all," said Steven Suflas, an attorney with Ballard Spahr in Cherry Hill, N.J., and Denver.
During his confirmation hearings, Secretary of Labor Alexander Acosta said he thought the salary threshold figure should be approximately $33,000. The Society for Human Resource Management recommended a salary threshold of approximately $32,000.
The court's rationale that the DOL should not rely on the salary level as part of the definition of who is exempt would lead to the incongruous result that an exempt employee could be paid no more than minimum wage on a salary basis if the person met the duties test to be considered exempt from overtime protection, Suflas said. (See the FLSA: Exemption Questionnaire for the primary duties that have to be met to be considered exempt under the various white-collar exemptions.)
[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]
This result would be an anomaly because the whole point of the exemption is that someone is making enough money through a salary that the person is not being taken advantage of by not making overtime, Suflas noted.
In the August decision, Mazzant backed away from saying the statute does not permit a salary-level test, Suflas said, but he added that the judge was "not very convincing" in doing so.
Maury Baskin, an attorney with Littler in Washington, D.C., who is representing the Chamber of Commerce in the litigation, disagreed. Baskin said that Mazzant's final order "could not have been clearer in finding the DOL has the authority to use pay levels as a factor to determine exempt status; just not such high levels as to be inconsistent with legislative intent. So long as the court grants DOL's motion to hold the case in abeyance pending the new rulemaking, the appeal should have no impact on employers."
Employers should follow the exempt salary level in the 2004 rule—$23,660—rather than the much higher one in the invalidated 2016 regulations, said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C.
DOL officials declined to comment for this article.
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