DOJ Will Drop Fifth Circuit Appeal of Obama-era White Collar Overtime Rule

September 12, 2017

Attorneys for U.S. Department of Justice (DOJ) have requested that the U.S. Court of Appeals for the Fifth Circuit voluntarily dismiss as moot the interlocutory appeal of the preliminary injunction granted regarding the Department of Labor’s controversial final overtime rule.

In a one-page unopposed Motion for Voluntary Dismissal of Interlocutory Appeal as Moot, which followed by just five days the district court’s August 31, 2017, final summary judgment for plaintiffs, the DOJ signaled it was through defending the Obama-era overtime rule. Thus, the Eastern District of Texas, which put the first nail in the coffin, appears to have done its best to put an end to the final rule.

Final overtime rule. The Obama Administration’s final rule originally would have gone into effect December 1, 2016. Among other things, it would have set the salary floor below which overtime must be paid to white-collar employees at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, which is currently the south. That resulted in a salary floor increase from $455 a week, or $23,660 annually, to $913 a week, or $47,476 annually. Under the rule, the salary level would be automatically updated every three years at the same 40th percentile.

But in November 2016, the Texas federal court granted an emergency motion for a preliminary injunction in a consolidated case challenging the rule brought by 21 states (and a business coalition), ruling that "Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary."

DOL’s position on appeal. Under the Trump Administration, the DOL backed off considerably from the earlier administration’s defense of the overtime rule: Its June 30, 2017, brief said the agency "has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule."

Summary judgment. On summary judgment, the district court found that the updated salary-level test contained in the final rule does not give effect to Congress’ unambiguous intent. "Specifically, the Department’s authority is limited to determining the essential qualities of, precise signification of, or marking the limits of those ‘bona fide executive, administrative, or professional capacity’ employees who perform exempt duties and should be exempt from overtime pay," wrote the court. But the final rule "makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties." And, by more than doubling the previous minimum salary level, the DOL "effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’" duties, the court said.

Important victory. Steven Pockrass, co-chair of Ogletree Deakins’ Wage and Hour Practice Group, called the ruling "an important victory for employers." He said that compliance with the revised overtime regulations would have been extremely costly and burdensome for many employers. Pockrass further suggested that employers now need to focus their attention on what he called "a highly detailed Request for Information (RFI) concerning the overtime regulations that the DOL published in the Federal Register."

The Labor Department released its much anticipated Request for Information on the overtime rule in a July 25 press release. The RFI seeks comment and information on 11 particular questions, including several questions related to appropriate salary levels. Pockrass said that it’s important that employers make their voices heard on this issue. He noted that comments in response to the RFI are due no later than September 25, which is just weeks away.