A federal judge has blocked a new Department of Labor regulation that would have made millions of middle-income workers eligible for overtime pay. The rule was scheduled to take effect on December 1 and it was expected to be a key part of President Barack Obama’s economic legacy.
The law gives workers making less than $47,476 a right to time-and-a-half overtime pay. The old rule had applied only to workers making less than $23,660 per year.
But Amos Mazzant, a federal judge in Texas who was appointed by President Obama just two years ago, has called the rule’s future into question. It’s just a preliminary ruling, but Mazzant’s opinion strongly suggested that he would ultimately hold that the Labor Department’s new rule was illegal.
Labor rights groups blasted the ruling. “Workers will continue to work longer hours for less pay thanks to this obstructionist litigation,” said Christine Owens of the National Employment Law Project in an emailed statement.
Because the ruling overturns a regulation that was generally seen as giving workers more rights, it has been cheered by business groups. But ruling could lead to an outcome that’s not great for anyone. If nothing else, Obama’s rule — that everyone making less than $47,476 was entitled to overtime pay — had the virtue of simplicity. Employers would have grumbled, but at least it would have been crystal clear who was affected.
But now it looks like the Labor Department could be forced to adopt a more complicated rule that focuses on the specific details of each worker’s job. That’s going to force employers to spend more money on lawyers to figure out who is eligible for overtime. At the same time, it will make it harder for employees to figure out when their bosses are breaking the law.
A judge says the law doesn’t allow a salary-based rule
Modern labor law dates back to 1938, when Congress passed the Fair Labor Standards Act. A key requirement of that law was that workers receive time-and-a-half pay any time they’re asked to work more than 40 hours per week.
Still, lawmakers understood that this requirement didn’t necessarily make sense for people in management, administrative, and professional positions who typically enjoy high levels of autonomy on the job. Managers and professionals are typically well-paid and have a fair amount of bargaining power, so there was less reason to worry about them being exploited on the job. And they typically don’t punch a time clock.
So Congress said that the overtime rule would not apply to “any employee employed in a bona fide executive, administrative, or professional capacity.” And it put the Labor Department in charge of defining who qualified as an exempt employee under these rules.
Early versions combined salary thresholds with tests that focused on a worker’s specific job duties. In 2004, the Labor Department simplified the rule and placed a greater emphasis on the salary requirement. Workers making an annual salary higher than $23,660 could generally be considered exempt from the overtime requirement, while workers making less than that had to be paid overtime.
The Obama administration wanted to double that threshold so that anyone making less than $47,476 will be guaranteed overtime pay.
But Mazzant ruled that the Labor Department’s entire approach is a misreading of the law. “Congress intended the exemption to apply to employees doing actual executive, administrative, and professional duties,” he wrote. Instead, the Labor Department effectively defined the rule to apply to an anyone paid more than $47,476.
“The [Labor] Department has admitted that it cannot create an evaluation based on salary alone,” Mazzant wrote. “But this significant increase to the salary level creates essentially a de facto salary-only test.”
“The Department estimates 4.2 million workers currently ineligible for overtime will automatically become eligible without a change to their duties,” Mazzant noted. “Congress did not intend salary to categorically exclude an employee with executive, administrative, and professional duties from the exemption.”
The ruling represents a significant change in how employment law has traditionally been interpreted. While earlier versions of the law did include criteria beyond salary, salary has long been treated as the primary criteria for deciding whether a worker could be exempted from overtime requirements. Mazzant’s ruling not only calls the new $47,476 figure into question — it could force the Labor Department to reconsider the whole concept of using a salary threshold to determine who is entitled to overtime.
And whatever its flaws, the salary threshold has at least one big advantage: It’s clear and objective. It’s easy to tell whether or not a particular worker is being paid more than $47,476. In contrast, a rule that determined a worker’s status based on details of his or her job duties could make things more complicated for everyone. Employers would need more legal advice, and workers would face greater uncertainty about whether employers were breaking the law by classifying them as executive or professional workers.
Obama’s overtime rule was probably doomed anyway
Even before Mazzant’s ruling, there was reason to doubt that the new overtime rule would survive the Trump administration. Republican members of Congress have been criticizing the rule all year, and those same lawmakers quickly praised Tuesday’s ruling.
If Hillary Clinton had won the White House, she would have likely appointed a Labor Secretary who would have looked for a way to revive Obama’s overtime rule. In contrast, whoever Donald Trump chooses as secretary of labor is unlikely to have much interest in expanding overtime protections.
So if Judge Mazzant’s ruling is upheld on appeal, the Trump administration is likely to quietly adopt a rule that gives employers broad discretion to classify its employees as exempt — and therefore ineligible for overtime.
And even if appeals courts reject Judge Mazzant’s reading of the law, the Trump administration can still roll back Obama’s rules. It will just take longer and expose Trump to more criticism from Democrats for rolling back worker rights.