Texas judge blocks rule and enters a nationwide injunction

Theresa Zechman,  employment management and labor relations specialist, Stevens and Lee, offers this analysis of yesterday’s nationwide injunction putting overtime pay regulation on hold.

U.S. District Judge Amos Mazzant sided with 21 states by deciding to issue a preliminary injunction that blocks the DOL’s overtime expansion regulation from taking effect on Dec. 1. The Court held that the States demonstrated a likelihood of success in their challenge of the rule as well as irreparable harm if it went into effect, while the DOL failed to show it would be harmed if the rule were delayed.

The Court found that Congress intended the EAP (executive, administrative, professional) exemption to apply to employees doing actual executive, administrative, and professional duties without regard to a minimum salary level. As a result, the plain meanings of the terms used in Section 213(a)(1), as well as Supreme Court precedent, affirms the Court’s conclusion that Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary.

Directly in conflict with Congress’s intent, the Final Rule states that “[w]hite collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption, and therefore will be eligible for overtime, irrespective of their job duties and responsibilities.”  With the Final Rule, the Court found that the DOL exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test.   As a result, the Court stated that the Final Rule was unlawful. The Court noted that the DOL’s role is to carry out Congress’s intent.  If Congress intended the salary requirement to supplant the duties test, then Congress, and not the DOL, should make that change.

Specifically, the Final Rule did not comport with Congress’s intent. To be exempt from overtime, the regulations require an employee to (1) have EAP duties; (2) be paid on a salary basis; and (3) meet a minimum salary level. The Final Rule raises the salary level from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) The salary level was purposefully set low to “screen out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.” The DOL admitted that it could not create an evaluation based on salary alone.”  But this significant increase to the salary level creates essentially a de facto salary-only test. The Court noted that for instance, the DOL estimated 4.2 million workers were currently ineligible for overtime, and who will fall below the minimum salary level, and will automatically become eligible under the Final Rule without a change to their duties. Congress did not intend salary to categorically exclude an employee with EAP duties from the exemption.  Therefore, the Final Rule should not be accorded Chevron deference because it is contrary to the statutory text and Congress’s intent.

The Court also found that the DOL lacked the authority to implement the automatic updating mechanism. Additionally, the Court held that the States demonstrated that they would suffer irreparable harm if the preliminary injunction was not granted and issued a nationwide injunction.

A hearing on the summary judgment motion is currently scheduled for Monday, November 28, 2016.