Justice Department Obtains Pause in Overtime Case Litigation

Business groups file brief in support of the order blocking the overtime rule

By Allen Smith, J.D. Jan 27, 2017
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​It remains unclear whether President Donald Trump's Department of Labor (DOL) will support the former administration's challenge to a court order blocking the new overtime rule. But there are early indications that new DOL leaders will not fight the court order.

On Jan. 26, the 5th U.S. Circuit Court of Appeals granted the U.S. Department of Justice's (DOJ's) motion for a 30-day extension in which to file its reply brief in the overtime rule litigation to allow incoming leadership adequate time to consider the issue. The reply brief, which originally was due Feb. 7, will follow on the heels of business groups' friend-of-the-court brief, filed Jan. 24.

The DOL under former President Barack Obama had appealed the Nov. 22, 2016, district court order blocking the overtime rule, but now the DOL might say it consents to the injunction, according to Steven Suflas, an attorney with Ballard Spahr in Denver.

"The new administration—once the department's new leadership is in place—may not want to pursue the appeal further," agreed Robert Boonin, an attorney with Dykema in Detroit.

The motion is consistent with Trump's Chief of Staff Reince Priebus' memo to department heads freezing federal regulations that have not yet taken effect, Suflas added.

The overtime rule was supposed to take effect Dec. 1, 2016. In an e-mail to his clients regarding the status of the overtime rule, Brett Bartlett, an attorney with Seyfarth Shaw in Atlanta, posed the question: If the 5th Circuit reverses the preliminary bar on the overtime regulation and determines that the rule took effect retroactively on Dec. 1, would the rule be considered frozen in that instance or not? While the answer is unclear, "I bring this to your attention because of the commentators who have exclaimed that the overtime rules are dead," he noted. "These rules' demise should not yet be cause for exaggeration."

Business Groups' Brief Supports the Order

The DOJ's motion came a day after business groups, including the U.S. Chamber of Commerce and National Federation of Independent Business, filed their brief in support of the order blocking the regulation. The business groups, in addition to 21 states, are challenging the overtime rule, and their claims have been consolidated.

The brief maintained that the overtime rule and its higher salary level for determining employees' exempt status "flouts Congress' unambiguous intent to employ functional exemption in which job duties are the primary criterion for applying the exemption" (emphasis in the brief).

The overtime rule is flawed, the brief maintained, for failing to:

  • Acknowledge just how radically the DOL changed the law. "The new rule does something unprecedented and profoundly consequential: It includes only a high salary threshold (more than doubled since 2004), which is no longer merely excluding obviously nonexempt employees."
  • Answer the critical question of how many of those previously exempt employees would have been exempt based on their functional job duties. "A sweeping change in regulatory status for millions of individuals cannot be treated as an afterthought," the brief said. "It was plainly unreasonable for DOL to significantly raise the salary threshold for the white-collar exemption without assessing whether it was improperly sweeping in employees who should have been exempt based on their job duties."
  • Account for the serious reliance that the previous rules engendered. "Year after year, businesses built white-collar workforces on the premise that the exemption hinged first and foremost on job duties as long as the employee's salary exceeded a relatively low threshold," the brief said. "But DOL then cast aside those settled expectations with the stroke of a pen by doubling the salary threshold to unprecedented heights" (emphasis in the brief).

[SHRM members-only HR Q&A: Overtime Eligibility: Exempt Salary Basis: What types of compensation can an employer include in an exempt employee's salary to meet the FLSA [Fair Labor Standards Act] minimum salary requirement?]

Low Threshold as Proxy for Exempt Status

The business groups appear to concede that a low threshold is a fair proxy for exempt status, Boonin noted. If an employee's salary is below a low threshold, that employee would almost certainly fail the duties tests, he explained. Under the overtime rule, "the DOL set the floor too high and has acknowledged that it would make millions of workers lose their exempt status even though they meet the duties tests," Boonin said.

The district court order blocking the overtime rule suggested that salary can't be a factor in the exempt analysis. The brief backed away from this stance and said a worker's salary could be so low that the individual couldn't possibly be exempt, Suflas observed.

Doubling the salary level was extreme, and there was little recognition of the impact this would have on the business community, he noted.

But the 21 states suing the Labor Department over the rule made a more direct attack in their brief on the salary threshold "as having been unauthorized and invalid from the very beginning," said John Thompson, an attorney with Fisher Phillips in Atlanta.

 

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