Like a horror movie villain, Obama overtime rule fight won’t die

Published on October 30, 2017

New York — The Obama administration’s 2016 overtime rule was left for dead after a Texas federal judge struck it down, but the controversial regulation started stirring again a day before Halloween when the U.S. Department of Labor decided to appeal, a move experts said is designed to protect the agency’s authority to set a salary threshold for overtime exemption that’s more to the Trump administration’s liking.

The Labor Department notified U.S. District Judge Amos Mazzant on Monday that it would be appealing his August order invalidating the Obama administration’s 2016 rule that greatly expanded the Fair Labor Standards Act’s overtime exemptions for executive, administrative and professional, or EAP, workers. The rule would have doubled the minimum salary required to qualify for the exemption from $23,660 annually to just over $47,000 per year, increased the overtime eligibility threshold for highly compensated workers from $100,000 to about $134,000, and created an index for future increases.

Labor Secretary Alex Acosta has indicated on numerous occasions that the Trump DOL would seek to write a revised version of the rule that sets a salary level somewhere between the one proposed in 2016 and the existing threshold of $23,660, set in 2004 by the Bush administration.

Locke Lord LLP partner Richard Glovsky pointed out that a notice of appeal is a perfunctory step that simply reserves a party’s right to pursue an appeal. “My impression is that the DOL is not 100 percent sure what it wants to do,” Glovsky told Law360. “It wants to keep its options open.”

In a statement shortly after it filed Monday’s notice, the DOL indicated that it will ask the Fifth Circuit to stay the case as soon as the appeal is docketed while the agency “undertakes further rulemaking to determine what the salary level should be.”

But there’s a problem: It’s not clear from Judge Mazzant’s ruling whether the agency has the authority to use salary as a basis for defining the EAP exemption in the first place — leading experts to speculate that affirming that authority is the primary reason behind the DOL’s appeal.

“It’s not the normal [type of case] you see. It has some different twists and turns to it,” said David C. Burton, a partner at Williams Mullen. “The DOL wants to get [its new] rule out without this litigation putting them in the position of having to argue whether or not they have the authority to issue it.”

Christine Owens, executive director of the National Employment Law Project, a workers’ rights group that has remained steadfast in its support of the 2016 rule, said in a statement that the DOL’s appeal “is good news for the millions of workers who need better protections of their right to overtime pay,” and that the agency “is right to defend its authority to issue a robust salary threshold to set the baseline for this exemption.”

The apparent uncertainty over the DOL’s ability to set a salary threshold for overtime exemption stems from Judge Mazzant’s November ruling issuing a preliminary injunction blocking the rule. The judge said then that nothing in the exemption indicates Congress wanted the DOL to define employee classifications with respect to a minimum salary level.

That decision raised enough of a question about the scope of the DOL’s authority regarding the EAP exemptions that the agency addressed it in a brief at the Fifth Circuit in June, after the Trump administration was in place. The agency said that while it “decided not to advocate for the specific salary level” set by the 2016 rule, it nonetheless had the power to use salary as a component for testing whether a worker should be paid overtime.

That appeal, which has since been withdrawn, was challenging Judge Mazzant’s preliminary injunction.

In his August ruling invalidating the 2016 rule outright, Judge Mazzant said the salary level set by the DOL was so high that it flouted Congress’ intention that the overtime exemption apply to employees who perform “bona fide executive, administrative or professional capacity” duties.

He said that by setting the salary level where it did, the DOL effectively eliminated the so-called duties test for determining which workers are eligible for the EAP exemption, which it lacked the authority to do.

Judge Mazzant, however, was careful to note that he wasn’t making any determination regarding the lawfulness of the salary level test or the DOL’s authority to issue one, saying instead that he evaluated only the salary-level test as proffered in the 2016 rule.

Attorneys speculated following that ruling that it still left plenty of room for interpretation as to whether the DOL has the ability going forward to use a salary test when dealing with the overtime exemption.

Steven Pockrass, co-chair of Ogletree Deakins Nash Smoak & Stewart PC’s wage and hour practice, told Law360 on Monday that the DOL is likely trying to “get [Judge Mazzant’s August decision] off the books so there is no longer any ruling that limits the DOL’s authority” still in effect.

“The goal is to get the district court’s decision vacated as if it was never on the books,” Pockrass said, noting that he expects the government to also argue after it issues a new rule that the appeal is moot.

But that approach could also backfire, attorneys say, since the Fifth Circuit may decide not to grant the DOL’s request for a stay.

Burton noted that by filing an appeal, the DOL could be opening the door for the Fifth Circuit to overturn Judge Mazzant’s ruling and uphold the Obama-era rule in full, which would create even greater procedural hurdles for the Trump DOL to justify any changes if it later decides to revisit the regulation and set a salary threshold it considers more appropriate.

In another procedural twist on Monday, the AFL-CIO also filed its own notice of appeal with Judge Mazzant, who had previously denied the union’s bid to intervene in the case.

Glovsky, for one, noted that the union may ultimately present an argument that coincides to some extent with the agency’s position that it has the power to set a salary level threshold.

But the union may go further and “try to get the Obama regulation to be upheld in its entirety” if it has the opportunity to present arguments to the Fifth Circuit, Glovsky said.

The cases are State of Nevada et al. v. U.S. Department of Labor, case number 4:16-cv-00731, and Plano Chamber of Commerce et al. v. R. Alexander Acosta, case number 4:16-cv-00732, in the U.S. District Court for the Eastern District of Texas.

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