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 Federal Judge Strikes Down Obama-Era Overtime Rule, Higher Salary Threshold

Employers, including long term and post-acute care operators, will likely not have to be concerned any longer about an Obama-era regulatory change that would have dramatically increased the salary level of those employees who are eligible for overtime pay. This is because on Aug. 31, Sherman, Texas-based U.S. District Judge Amos Mazzant struck down changes in the Department of Labor (DOL) rule issued in 2016. The judge said the rule overstepped the agency’s authority and was “invalid.”

The Trump administration can appeal, but is not expected to and instead has said it will clarify overtime rules sometime in the future.

At the core of the Obama administration’s revamped overtime rules would have been an increase in the salary threshold under which certain workers would be guaranteed time-and-a-half pay when they worked more than 40 hours in any given week. The current threshold is $23,660, but would have risen to $47,476 per year if the oft-litigated Obama administration rule had been implemented.

Mazzant, who had issued a preliminary injunction staying the implementation of the overtime changes in late 2016, said in his ruling that DOL’s salary level threshold change “would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” He said DOL was allowed to set a salary level for a defacto “floor” to aid in determining whether an employee qualified as an overtime-exempt employee, but the department does not have the authority to determine a salary-level benchmark that would eliminate the work duties test.

David Kim, a partner in the New Jersey office of labor and employment law firm FordHarrison, tells Provider the major takeaway of Mazzant’s decision is that the Obama administration’s attempt to increase the threshold minimum salary level for overtime-exempt status, from $455 a week to $913 a week, along with automatic updating every three years, is likely dead.

“It would be a huge surprise for Trump’s DOL to appeal this decision, particularly since President Trump has publicly derided this rule as being too heavy handed,” Kim says.

That leaves the Trump administration with two likely options:

·         Do nothing.  In which case, the current rules will continue to remain in place with no change.

·         Introduce its own rule that would seek to increase the $455 a week threshold but quite certainly not to the level of $913 recommended by the Obama administration.  “Labor Secretary Alexander Acosta has stated that while he did not believe the DOL has the authority to increase the threshold as high as the Obama administration attempted to do last year, he acknowledged that the current $455 a week threshold could use an update,” Kim says.

It is not 100 percent clear which of these two options the Trump administration would choose to pursue.  “Clearly, they have other agenda items that are more high priority than updating the overtime rules.  Even were the Trump administration to go with option 2 at some point, it would take many, many months as they would have to first publish proposed rules, permit the public an opportunity to comment, and then issue final rules,” Kim says.

“By way of comparison, the Obama administration’s proposed rule was published in July 2015, and after an opportunity to comment, the Final Rule was published in May 2016 to be effective December 2016 [which was struck down in the interim by the courts].” 

The timeline for the overtime rule saga started on May 18, 2016, when DOL published its final rule amending the exemptions tests for executive, administrative, and professional employees under the Fair Labor Standards Act.

A few months later in September 2016, two separate lawsuits (later combined into one) were filed in the U.S. District Court for the Eastern District of Texas, Mazzant’s court, which resulted in the judge issuing a temporary injunction preventing the overtime rule from going into effect on Dec. 1, 2016, as originally planned.

In its waning days, the Obama administration appealed the court’s injunction to the U.S. Court of Appeals for the Fifth Circuit. However, legal experts said back in June of this year while the appeal was pending before the Fifth Circuit, the Trump administration’s DOL sent a request for information asking for public comment on a number of questions related to the overtime rules, signaling the appeals process was likely not going to be pursued.

Now that Mazzant has issued a permanent ruling on the overtime rule changes, the DOL appeal to the Fifth Circuit is effectively moot since the District Court in Texas possessed jurisdiction to determine the final merits while the Obama-era appeal was pending. The Mazzant decision granting summary judgment came in the case of State of Nevada v. U.S. Department of Labor.

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