Labor Department Appealing Fifth Circuit Ruling on Overtime Pay Rule

(CN) – The U.S. Labor Department said Monday it wants the Fifth Circuit to stay an appeal of lower court ruling striking down an Obama-era overtime rule while the Trump administration works to revise the regulation.

The overtime rule proposed by the Obama administration would have increased the threshold for overtime-exempt employees to $913 a week, or $47,476 annually for a full-time employee, from the current $455 a week, or $23,660 annually.

U.S. District Judge Amos Mazzant III issued a preliminary injunction in November 2016 halting the rule’s  implementation in response to litigation filed by 21 states and dozens of business organizations, and that ruling was appealed to the 5th Circuit.

In asking the circuit to hold the appeal in abeyance, the Labor Department said it wanted the appeals court to wait to act until the administration could complete “further rule-making to determine what the salary level should be.”

The department published a Federal Register notice in July called for public comments on potential changes to the rule. The expectation is the Trump administration will issue a new rule with a lower salary threshold.

In his ruling November 2016 ruling, Mazzant sided with businesses and 21 states who challenged the rule, contending the salary level was set too high.

According to Mazzant’s final opinion, issued in November 2016, the plaintiffs compiled data from seven state officials “who estimated [the thresholds] will cost their respective states millions of dollars in the first year to comply with the final rule.”

Labor Secretary Alexander Acosta also expressed concern about the consequences of the rule during his confirmation hearing in April. He noted there was a need to revise the rule and acknowledged wages were in dire need of increase due to a steady uptick of living expenses.

But like Mazzant, Acosta also expressed fear that if new salary levels were set too high, too quickly, some businesses would struggle to fork over higher payroll expenses.

Acosta advocated for a compromise and suggested automatic eligibility for overtime hover at roughly $32,000 annually.

The U.S. Chamber of Commerce, which challenged the rule in 2016, reported last week it would continue to defend Mazzant’s opinion striking down the rule. According to the chamber, the Obama administration “went too far” in the rule and urged a “responsible update” to salary levels.

According to the Fair Labor Standards Act, employers are required to pay employees overtime for all hours worked beyond 40 hours per week. The act also gives the labor secretary power to evaluate which workers should be exempt from overtime requirements under white collar rules for those in “bona fide executive administrative or professional” positions.

Mazzant previously noted that any increase imposed on thresholds would “categorically exclude” workers from certain exemptions because of their salary level alone. The Labor Department placed too much emphasis on salary and not enough on the specific duties an employee must perform, which can guide eligibility rules for overtime.

Citing a 1940 regulation in support of his ruling, Mazzant explained: “The salary level was purposefully set low to screen out the obvious nonexempt employees, making an analysis of duties in such cases unnecessary.”

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