New Overtime Rule Remains in Limbo After Trump’s First Week

Kyle Weaver[1]

In late 2016, employers rejoiced after a federal judge in Texas unexpectedly enjoined the implementation of drastic changes to the formula for determining which employees are entitled to overtime compensation.[2] It’s well known that the Fair Labor Standards Act (hereinafter “FLSA”) requires certain employees be paid overtime for each hour worked in excess of forty in a given workweek.[3] However, the trick is determining which employees are so entitled. Employees who meet three tests—the salary basis test, the duties test, and the salary level test—are considered “exempt” employees, and are not entitled to receive overtime compensation.[4] Under present regulations, an employee will meet each of the above tests and be considered exempt from overtime if the employee: 1) is paid a salary which is not subject to variation for quantity or quality of work; 2) the employee’s job duties involve primarily executive, administrative, or professional duties; and, 3) the employee earns at least $455 per week, or $23,660 per year.[5]

On March 13, 2014, President Barack Obama directed the Department of Labor to update the regulations defining which white collar workers are protected by the FLSA’s minimum wage and overtime standards and to look for ways to modernize and simplify the regulations while ensuring that the FLSA’s intended overtime protections were fully implemented.[6] In May 2016, the Department of Labor promulgated its final rule which would drastically increase the “salary level” test, requiring employees earn at least $913.00 per week, or $47,476.00 per year to be considered exempt.[7] The new rule was to become effective December 1, 2016, to the distaste of many employers.[8] Many believed that now-President Trump would overturn or at least curtail the regulation early in his term—it was simply a question of how long employers would be subject to the new overtime rules—enter the Honorable Amos Mazzant.

On November 22, 2016, Judge Mazzant, of the United States District Court for the Eastern District of Texas, entered a preliminary injunction which temporarily stalled implementation of the Department of Labor’s new overtime rule.[9] The preliminary injunction came after Nevada and twenty other states, in addition to the Plano Chamber of Commerce and over fifty other business organizations filed suit against the United States Department of Labor and the Wage and Hour Division, challenging the final rule.[10] The court first addressed its own jurisdiction finding that the issue was ripe for judicial review because the issues raised were purely legal in nature and because the challenged regulations were a “final agency action.”[11] The court next explained that a party seeking a preliminary injunction must establish:

1) a substantial likelihood of success on the merits; 2) a substantial threat that the plaintiffs will suffer irreparable harm if the injunction is not granted; 3) that the threatened injury outweighs any damage that the injunction might cause the defendant; and (4) that the injunction will not disserve the public interest.[12]

Turning first to the Plaintiff’s likelihood of success on the merits, the court rejected the Plaintiffs’ argument that the FLSA did not apply to the states, finding instead that Congress “was clear in its intention for the FLSA to apply to the States.”[13] The court next addressed whether the Department of Labor’s construction of the FLSA was entitled to deference. The court explained its determination of whether the regulation was entitled to deference was guided by the two-part test announced by the United States Supreme Court in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.[14] Under Chevron, the court must first determine whether “Congress has directly spoken to the precise question at issue,” because “if the intent of Congress is clear, . . . the court . . . must give effect to the unambiguously expressed intent of Congress.”[15] However, the court explained “if Congress has not unambiguously expressed its intent regarding the precise question at issue, the Court will defer to the agency’s interpretation unless it is ‘arbitrary, capricious, or manifestly contrary to the statute.’”[16]

The court first sought to determine whether 29 U.S.C. § 213(a)(1) was ambiguous. That section provides: “‘any employee employed in a bona fide executive, administrative, or professional capacity . . . as such terms are defined and delimited from time to time by regulations of the Secretary’ shall be exempt from minimum wage and overtime requirements.”[17]           The State plaintiffs asserted that the court should go no farther than the first step of its Chevron analysis because the plain language of the exemption was clear and that Congress “directly and unambiguously spoke about the type of employees that must be exempt.”[18] The Department of Labor responded that its regulations were entitled to deference because Congress did not define the terms “bona fide, executive, administrative, or professional capacity,” and as such “Congress delegated to the Department the broad authority to interpret the terms through regulations.”[19]

The court began its analysis by explaining that the “precise question at issue” was what constituted an employee employed in an executive, administrative, or professional capacity.[20] The court next found that the statute was not silent in answering that question and that the court would assume congressional intent from the plain meaning of a word when the statute did not provide a definition.[21] The court looked to the Oxford English Dictionary to define the meanings of “executive,” “administrative,” and “professional,” and determined that the definitions “relate to a person’s performance, conduct, or function without suggesting salary.”[22] Thus, the court concluded: “it is clear Congress intended the EAP exemption to apply to employees doing actual executive, administrative, and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level.”[23] As such, the court held that the Department of Labor’s final rule contravened the unambiguous intent of Congress and was therefore unlawful.[24] Nevertheless, the court further concluded that the rule also did not deserve deference at Chevron’s second step because the substantial increase from $455 per week to $913 per week contravened the intent of Congress by establishing a “de facto salary-only test.”[25]

After finding that the Plaintiffs had shown a likelihood of success on the merits, the court next sought to determine whether the plaintiffs had demonstrated the remaining three factors that would entitle them to a preliminary injunction. The court determined that States’ significant costs of complying with the final rule was sufficient to demonstrate a likelihood of irreparable harm that would result if the injunction was not entered.[26] The court next balanced the hardships in favor of the plaintiffs, finding that the defendants were unable to articulate any harm they would suffer from delaying implementation of the rule.[27] Finally, the court determined the public interest would be best served by issuing an injunction to maintain the status quo while the court addressed the merits.[28] As a result, the court found that a nationwide injunction was proper because the scope of the alleged irreparable injury extended nationwide, and that such an injunction would protect employees from being subject to different exemptions based on location.[29]

On December 1, 2016, the Obama administration provided the District Court with notice that it intended to appeal the preliminary injunction.[30] Perhaps poetically, the notice was given on the same day that the Rule was supposed to take effect. However, the appeal may be short lived. On January 25, 2017, the Trump Administration hinted at its intention to withdraw the Department of Labor’s appeal to the United States Court of Appeals for the Fifth Circuit. Withdraw of the appeal will not render the preliminary injunction permanent, as the District Court has not formally determined the merits, nor entered a permanent injunction. Nevertheless, the withdraw may be a good barometer for how the administration will ultimately address overtime pay.

Political commentators explain that President Trump faces a difficult decision: curtail federal government regulation as promised, or alienate labor groups and middle class voters affected by the rule.[31] Aside from Executive action by President Trump, Congressional Republicans could utilize the Congressional Review Act which allows Congress to disapprove of federal regulations by joint resolution.[32] Such would be a life raft for Trump, saving him from a dicey political decision. On the other hand, the Trump administration could take a middle road and increase the minimum salary to a number between the present threshold of $455 per week, or $23,660 per year, and the proposed threshold of $913.00 per week, or $47,476.00 per year. Employers wait with bated breath as it remains to be seen whether Trump will toss out the new rule in its entirety or merely amend the salary level.


[1]Candidate for Juris Doctor, Cumberland School of Law, Samford University, B.S. Finance and Human Resources Management, Florida State University.

[2] Michael A. Shadiack & Lauren F. Iannaccone, Employers Cautiously Rejoice As Federal Judge Suspends New Overtime Rule, Connell Foley (Nov. 23, 2016), http://www.connellfoley.com/content/blog/employers-cautiously-rejoice-federal-judge-suspends-new-overtime-rule.

[3] See 29 U.S.C. § 207(a)(1).

[4] See 29 C.F.R. Part 541. See also 80 F.R. 38515.

[5] See 29 C.F.R. Part 541.

[6] Presidential Memorandum—Updating and Modernizing Overtime Regulations, The White House (Mar. 13, 2014), https://obamawhitehouse.archives.gov/the-press-office/2014/03/13/presidential-memorandum-updating-and-modernizing-overtime-regulations.

[7] United States Department of Labor, Wage and Hour Division, Final Rule: Overtime, https://www.dol.gov/whd/overtime/final2016/ (last visited Jan. 27, 2017).

[8] Id.

[9] Nevada v. United States DOL, No. 4:16-CV-00731, 2016 U.S. Dist. LEXIS 162048, at *33 (E.D. Tex. Nov. 22, 2016).

[10] Id. at *8-*9.

[11] Id. at *10-*12.

[12] Id. at *12.

[13] Id. at *15.

[14] Id.

[15] Nevada, 2016 U.S. Dist. LEXIS 162048, at *15.

[16] Id. at *15-*16.

[17] Id. at *16 (quoting 29 U.S.C. § 213(a)(1)).

[18] Id. at *16-*17.

[19] Id. at *17-*18.

[20] Nevada, 2016 U.S. Dist. LEXIS 162048, at *18.

[21] Id. at *18.

[22] Id. at *18-*19.

[23] Id. at *19.

[24] Id. at *22.

[25] Id. at *24-*25.

[26] Nevada, 2016 U.S. Dist. LEXIS 162048, at *

[27] Id. at *30

[28] Id. at *32

[29] Id.

[30] Merrit Kennedy, Obama Administration Appeals Judge’s Ruling to Block Overtime Pay Rule, NPR (Dec. 1, 2016 2:27PM EDT), http://www.npr.org/sections/thetwo-way/2016/12/01/504012412/obama-administration-appeals-judges-ruling-to-block-overtime-pay-rule.

[31] Tim Devaney, Trump faces tough decision on overtime rule, The Hill (Nov. 23, 2016 6:34 PM EST), http://thehill.com/regulation/307458-trump-faces-tough-decision-on-overtime-rule.

[32] Id. See also 5 U.S.C. § 801 et seq.

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