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Court Strikes Down Obama Administration Overtime Rules

On August 31, 2017, the United States District Court for the Eastern District of Texas, which previously issued an injunction against the Obama administration's revised FLSA overtime rules from taking effect, ruled that the rules were unlawful. Should the ruling not be appealed by the Trump administration, those rules are likely permanently dead.

The rules would have increased the minimum salary level for most exempt positions from a little over $23,000/year to over $47,000/year. It was estimated by the Obama administration that the rules would have rendered 4.2 million employees who were previously exempt from overtime to non-exempt status if employers did not increase employees' salary level to the new minimum.

Eastern District of Texas District Judge Amos Mazzant found: "This significant increase would essentially make an employee's duties, functions, or tasks irrelevant if the employee's salary falls below the new minimum salary level," which he found was contrary to the FLSA statute.

Although the US Secretary of Labor does have broad authority to define the overtime exemptions under the FLSA, that authority is not without limits. The FLSA statute speaks in terms of exempt employees' job duties, not their salary level. Judge Mazzant ruled:

This [overtime rule] is not what Congress intended with the [white collar overtime] exemptions. Congress unambiguously directed the Department to exempt from overtime pay employees who perform "bona fide executive, administrative, or professional capacity" duties. However, the Department creates a Final Rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee's job duties. ...

The court found that the new rules failed to carry out Congress's intent, that they were "not a reasonable interpretation" of the FLSA and, therefore, they were not entitled to deference and were unlawful. The Department of Labor does not have the legal authority to set a salary threshold that effectively eliminates the duties test.

It is expected that the Trump administration will now itself fashion new overtime rules. Some increase to the minimum salary level is likely, along with other changes to who receives overtime. After the Texas federal court's ruling, employers likely do not need to increase employees' salary level to $47,476/year for them to remain exempt. The former $23,660/year ($455/week) minimum salary level remains in effect, for now.


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