Labor Dept. in Washington: What’s the next move? (Shutterstock)
The judge who blocked the Dec. 1 rollout of the Obama administration’s overtime rule included conflicting statements in his ruling that the government might exploit to gain the rule a reprieve. It’s still likely the incoming Republican-controlled Congress will suspend the rule anyway, and employers are free to ignore it for now, but the lame-duck administration is not without tools to try and reverse the judge’s temporary injunction.
In his Nov. 22 order, U.S. District Judge Amos L. Mazzant preliminarily concluded that the Labor Dept. exceeded its authority by raising the salary cap below which all workers must receive overtime pay from $455 a week to $921 a week or $47,892 a year. The judge was interpreting the 1938 Fair Labor Standards Act, which established a minimum wage and required employers to pay overtime after a 40-hour work week.
The FLSA didn’t include a salary cap but it does have a broad exemption for administrative and executive employees, regardless of how much they earn. The Labor Dept. later added a salary test to help separate bona fide executives from non-managerial workers and gradually raised the cap over the years, without any strong objections from Congress.
In his ruling yesterday, Judge Mazzant said the Obama administration’s doubling of the cap was likely illegal because it virtually eliminated the other tests that are in the law. His order also strongly suggests the FLSA doesn’t give Labor the authority to impose a salary cap at all. But in a footnote he said he wasn’t challenging that authority, perhaps because in a 1966 decision the Fifth Circuit Court of Appeals, whose rulings he must obey, upheld Labor Dept. salary caps.
Thus, the judge ruled “his holding does not apply to historic salary level tests – just this new one,” said Gerald Hathaway, a partner at Drinker Biddle & Reath in New York, in e-mailed comments “And this is the fundamental flaw of the decision.”
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The administration might be cautious about appealing Mazzant’s decision to the Fifth Circuit, since that is the same court that upheld an injunction blocking President Obama’s plan to grant quasi-legal status to millions of illegal immigrants. But the appeals also court might seize upon the contradiction in Mazzant’s reasoning, Hathaway said.
Judge Mazzant’s ruling turns 65 plus years of how the law has been interpreted on its head. For that reason alone, I think that the decision will get the interest of the Fifth Circuit Court of Appeals, which has jurisdiction to hear an immediate appeal of the preliminary injunction issued by Judge Mazzant, and since the issues have been so thoroughly briefed, the appeals court could rely on the papers already submitted.
Others think it unlikely this lame-duck administration will be able to revive the rule before Donald Trump takes up residence in the White House. The 1966 decision came before the U.S. Supreme Court established the so-called Chevron deference standard for evaluating regulatory actions and might decide its earlier decision doesn’t apply to the facts in this case, said Alan Bloom, co-head of Proskauer’s Wage and Hour Practice Group.
“The answer for employers is: We don’t know what’s going to happen with the Fifth Circuit,” Bloom said. “We do know if nothing happens before Jan 20, there’s a strong possibility the Labor Deptartment simply withdraws its appeal and lets the injunction stand.”
Even if a court reverses Judge Mazzant’s injunction, the incoming Congress likely can use the Congressional Review Act to eliminate the overtime rule. That act gives Congress the power to reverse executive branch regulations that were handed down within 60 “session days” — a deadline the Republican–controlled Congress is watching closely as the year comes to a close.
But the odds of a court stepping in at this late date, with a change in administration, are low, said said Jesse Pannucio, a partner with Foley & Lardner who ran Florida’s labor department in the administration of Gov. Rick Scott.
“What the lower court has done is preserve the status quo and what the administration wants to do is impose a whole new set of regulations, so the equities like on the side of time,” he said.
For employers who raised employee wages past the $47,000 cap, most lawyers are advising their clients to leave the changes in place. To take the raises back “risks an employee-relations nightmare,” said Bloom.
Employers might well reverse plans to shift lower-paid employees to hourly status, however. That change can be expensive and disturbing to workplace culture, especially as employees accustomed to working flexible hours and using electronic devices outside the office discover they are restricted to a 40-hour schedule.
“If they carry a Blackberry or iPhone or access email from home or on a laptop it’s always a danger they will be working past 40 hours,” said Bloom. “It is a huge practical burden for employers to have to track time and to limit when and how they work.”
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