Appealed! Overtime Rule Saga Continues

On October 30, 2017, the Department of Labor (DOL) indicated that it intends to appeal to the Fifth Circuit a federal district court ruling from 2016 that invalidated Obama-era overtime changes.

To recap, the district court invalidated the revised overtime rules, determining that the substantially increased minimum salary level in those revised rules disregarded the necessary analysis of an employee’s duties, functions, or tasks. In other words, it relied too heavily on just the salary level in determining if an employee qualified for an exemption. The revised rules thereby permitted employees who were previously exempt to qualify for overtime pay on the basis of their salary alone. In its ruling, the district court held that Congress did not intend duties to be ignored in favor of a de facto simple salary analysis. On that basis, the overtime rules exceeded the DOL’s authority.

The obvious question is: if the Obama administration rule change was invalidated—and the Trump administration is commonly perceived to be adverse to the Obama-era revisions—then why is this ruling being appealed now?

We’re glad you asked. The earlier rule changes were made in accordance with the federal rulemaking process, which at a basic level requires notice of proposed rules, a public comment period, and the publishing of a final rule. Regulations cannot be simply overturned in the same way that an executive order can be. Not wanting to keep the 2004 rule status quo, the DOL has been going through an initial process of developing proposed rules to modify the Obama-era revisions.

In August, we pointed out that the DOL sought comments (a “Request for Information” or RFI) on ideas for future revisions to the Obama-era revisions. The DOL received over 140,000 comments by the September 25 comment period close. As noted in the DOL RFI, one option for future revisions would be raising the threshold level from its current $455 a week level to something less than the Obama-era erstwhile increase to $913 a week.

Even though the new administration may not necessarily mind the 2016 revisions being blocked, the court’s ruling left open the possibility that the salary threshold test is invalid. In appealing the ruling now, the DOL avoids waiving the legitimacy of a salary threshold and retains leeway to adjust the salary level to a new level it finds acceptable now, even if it is lower than the 2016 threshold.

To add another complication to this ongoing lesson in regulatory, injunctive, and appellate processes, the DOL will file a motion to hold its appeal in abeyance while further rule making takes place.

We will continue to keep you apprised of developments in this area. Contact Evan Bonnett of Hinshaw’s Rockford office or your regular Hinshaw attorney if you have any other questions on this important topic.