United States: Business Associations Support Injunction Blocking Overtime Rule

Last Updated: February 2 2017
Article by Steven F. Pockrass

Sixty business associations that oppose the drastic changes to the overtime rules that were proposed by the U.S. Department of Labor (DOL) under the Obama administration have filed an amicus brief with the U.S. Court of Appeals for the Fifth Circuit in support of a preliminary injunction that blocks the revised overtime rules from going into effect.

In a brief filed on Tuesday, January 24, 2017, the business associations argue that Judge Amos L. Mazzant III, a federal judge for the Eastern District of Texas, properly issued the nationwide injunction on November 22, 2016. The injunction halted the implementation of regulatory revisions that were scheduled to go into effect on December 1, 2016, and which would have more than doubled the minimum salary requirements for the major white collar overtime exemptions under the federal Fair Labor Standards Act (FLSA) from $455 per week to $913 per week. Annualized, that would be a change from $23,660 to $47,476.

Twenty-one states are parties to the lawsuit that resulted in the preliminary injunction. Most of the business associations that filed the amicus brief in the appellate court also are plaintiffs in a companion lawsuit that Judge Mazzant consolidated with the states' lawsuit. Whereas the states moved for a preliminary injunction in the district court, the business associations filed a motion for summary judgment, which remains pending before Judge Mazzant. In his preliminary injunction order, Judge Mazzant stated that he had treated the business plaintiffs' submissions as amicus filings, so the filing of an amicus brief in the Fifth Circuit is consistent with that approach.

In their amicus brief, the business associations emphasize that the FLSA's exemption of bona fide executive, administrative, and professional employees requires a functional approach that focuses on job duties. In contrast, and as Judge Mazzant found, the DOL's radical change to the minimum salary requirement creates a de facto salary test that conflicts with the FLSA's plain language and would result in the conversion of millions of workers to non-exempt status irrespective of their job duties.

"For those 4.2 million employees, DOL has effectively established by administrative fiat a white-collar minimum wage despite zero statutory authority authorizing such a drastic step," according to the business associations.

Another point made by the business associations is that the DOL ignored the reliance interests associated with the existing white-collar regulations. Employers have structured their business models based on those regulations, and the DOL's proposed changes would have a profound negative impact on many currently exempt employees who make less than $913 per week. Although they do not receive overtime pay, these individuals are paid a guaranteed salary even if they work fewer than 40 hours in a week, and they often receive above-average benefits, greater opportunities for advancement, and more flexibility than their non-exempt co-workers.

The business associations only addressed the likelihood of success on the merits in their amicus brief, stating in a footnote that the plaintiff states had extensively addressed the other factors necessary for a preliminary injunction in their appellate brief. In that same footnote, however, the business plaintiffs did identify the change in presidential administrations as a reason not to reverse the injunction.

Since the States filed their brief, the new Administration has instructed all executive agencies to postpone the implementation of new regulations that have not yet gone into force. See Memorandum for Heads of Executive Departments and Agencies, (Jan. 20, 2017), http://bit.ly/2kkOVYV. That action further counsels in favor of leaving the preliminary injunction in place pending the resolution of this litigation and any additional regulatory review.

In addition to the amicus brief filed by the business associations, four additional states (Colorado, Missouri, Montana, and Wyoming) that are not parties to the district court lawsuit also filed an amicus brief on January 24 in support of the preliminary injunction. Although much of their brief focuses on state sovereignty, these four states quote some of the same language from decisions by the Supreme Court of the United States as the business associations. In particular, both of the amicus briefs contend that the scope of the white collar exemptions is "a question of deep economic and political significance," and if Congress had intended to confer upon a government agency the authority to make a policy decision that would directly impact the exempt status of 4.2 million individuals, then "it surely would have done so expressly." 

The DOL's reply brief in support of its appeal is due on or before January 31. An oral argument date has not been set yet, but the Fifth Circuit has stated that oral argument will be scheduled for the first available sitting after the close of briefing. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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