A Texas court formally nullified the Obama administration's expansion of the federal overtime rule, saying the previous administration overreached when it expanded the number of people covered by the rule. The same court had prevented the rule from going into effect last year.
In Thursday's ruling, District Court Judge Amos Mazzant in Plano, Texas, ruled that the Department of Labor lacked the authority to set a salary threshold so high that it would "effectively eliminate" other requirements for when a person is eligible for overtime, such as what duties they perform.
"The department has exceeded its authority and gone too far with the final rule," Judge Mazzant said. "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. Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress's unambiguous intent."
Business groups cheered the announcement. "Today's decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with DOL on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted," said Angelo Amador, executive director of National Restaurant Association's Restaurant Law Center.
Federal law says employees must be paid time-and-a-half once they work more than 40 hours in a week. However, businesses may exempt workers from the requirement if their duties are "managerial" in nature and they reach a certain salary threshold.
Last year, the Labor Department announced that the threshold, previously $23,000 annually, would rise to more than $47,000 and would be updated every three years to reflect wage growth. The administration's rule change would have meant that 4 million more workers would be eligible for overtime.
Former President Barack Obama's administration said it was merely updating the Fair Labor Standards Act to reflect current employment policies. Business groups and several states opposed the rule, saying it set the threshold too high, making it impossible for employers and employees to set flexible work schedules. They challenged it in court, and in November Mazzant stayed it.
Liberal groups said the change was needed. "For years, as the salary threshold was eroded by inflation and congressional inaction, businesses have used the imprecision of the duties test to avoid paying overtime to low-level employees who they wrongly classify as managers or executives," said Celine McNicholas, labor counsel for the Economic Policy Institute.
President Trump's administration has begun the process of rolling the rulemaking back. It reopened it to public comment last month, a prerequisite before the department can officially rescind the rule.