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    New overtime regulations halted by eleventh-hour federal court decision

    Along with the blast of winter air hitting many states, the Department of Labor’s (DOL) new overtime regulations, scheduled to take effect on December 1, have been iced. In an eleventh-hour decision from Texas federal Judge Amos Mazzant, the court roundly criticized the DOL’s overreach of rulemaking authority and granted an emergency preliminary injunction requested by the 21 states and 50-plus business organizations that sued the DOL.

    In March 2014, President Obama directed the Secretary of Labor to modernize and streamline the current regulations governing the so-called "white collar" exemptions that apply to executive, administrative and professional employees. The DOL received over 293,000 comments in response to the proposed rules it developed, but it proceeded to publish a Final Rule in May, with a planned effective date of December 1. In order to remain exempt from the overtime payment requirement, the Final Rule required exempt employees to perform the duties required of each exemption and to be paid a salary of $913 or more per week, or $47,476 per year. The Final Rule represented more than a doubling of the current weekly salary or annual equivalent set forth in the exemption laws ($455 per week and $23,660 per year, respectively). The Final Rule also envisioned an automatic update in that amount every three years.

    The court’s 20-page analysis essentially questions whether it is the place of Congress or an agency to make rules that arise under the Commerce Clause of the Constitution. The states argued that the effect of a federal law forcing states to implement this new rule would have devastating effects on their priorities, budgets and services. Ultimately, the court also looked at the statutory meaning of the executive, administrative and professional exemptions and found that Congress did not intend for an administrative agency to define or delimit those duties by establishing a minimum salary level. “If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

    The injunction is in effect nationwide, pending further review by the court. While this decision merely grants a preliminary — not a permanent — injunction, there is sure to be further litigation to determine the merits of whether the DOL lacks authority to promulgate the rule, followed by appeals. Stay tuned.

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