Texas Court Strikes Down Department of Labor Overtime Rule

09/05/2017 / Daniel J. Ballintine and Nic S. Puechner

In November 2016, a federal judge in the Eastern District of Texas issued a nationwide injunction blocking a Department of Labor (DOL) regulation, originally scheduled to take effect on December 1, 2016. On August 31, 2017, that same court issued a summary judgment order which fully invalidated the regulation.

That DOL regulation would have doubled the minimum salary necessary for exempt status under the “white collar” exemption from $23,660 ($455/week) to $47,476 ($913/week). The case arose as a challenge to then-President Obama’s March 13, 2014 memorandum directing the Secretary of Labor to “modernize and streamline the existing overtime regulations for executive, administrative, and professional employees.” 

The plaintiffs in the case include the State of Nevada and other pro-business entities. In granting summary judgment to the plaintiffs, the Texas court held the DOL exceeded its authority in attempting to promulgate the new regulation. In essence, the court reasoned that such a significant increase in the salary requirement for exempt status would effectively supplant an analysis of the job duties required for the exemptions. The court explained that because Congress had expressed a clear intent in the federal overtime law to exempt certain categories of jobs from overtime requirements based on the jobs’ primary duties, such a drastic and broad increase in the salary requirement would effectively, and impermissibly, override Congressional intent. 

While the DOL could appeal the court’s decision to the Fifth Circuit Court of Appeals, the Trump Administration’s expressed opposition to the proposed regulation may cause it to rethink such a move. Indeed, after the court issued the injunction, the DOL requested oral argument so that the parties could argue the question of the DOL’s authority to take salary into account for eligibility purposes. But with the recent turn of events, the DOL may decide to withdraw that appeal, even though the court’s opinion does not make “any assessments regarding the general lawfulness of the salary-level test or the Department’s authority to implement such a test.” Labor Secretary Alexander Acosta has indicated a willingness to raise the minimum salary to reflect increased costs of living, so it may be that although the Obama-era rule has been struck down, plans to adjust the minimum wage salary will continue.

Employers with questions about overtime requirements or exemptions from such requirements should contact a member of Larkin Hoffman’s employment, labor and benefits practice.