Judge Grants Injunction Against New Federal Overtime Rule

SHERMAN, Texas — With the clock ticking on the implementation of the new federal overtime rule, a federal judge has ruled in favor of hitting the pause button.

U.S. District Judge Amos Mazzant, agreed with 21 states and a coalition of business groups — including the U.S Chamber of Commerce — that the new rule is unlawful and granted their motion for a nationwide injunction, according to Reuters.

In September, Nevada Attorney General Adam Laxalt filed the lawsuit in U.S. District Court in Eastern Texas, urging it to block implementation before the regulation takes effect on Dec. 1. Nevada was joined by 20 other states in the challenge, as CSNews Online previously reported.

The Obama Administration unveiled the new rule in May. The most notable change announced will be a nearly doubling of the current salary threshold from its current $23,360 to $47,476, under which virtually all workers will be eligible for time-and-a-half pay. This change would make nearly 5 million currently exempt employees eligible nationwide.

On Sept. 20, the U.S. Chamber of Commerce filed a legal challenge to the overtime rule, arguing that U.S. Department of Labor (DOL) exceeded its statutory authority in issuing the regulation and violated the Administrative Procedure Act, as CSNews Online also reported.

The U.S. Chamber led a broad coalition including the Texas Association of Business, National Automobile Dealers Association, the National Association of Manufacturers, National Association of Wholesaler Distributors, National Federation of Independent Business, National Retail Federation, and more than 50 other national and Texas business groups.

The two lawsuits were later consolidated, Reuters reported.

On Nov. 22, Mazzant, who was appointed by President Barack Obama, ruled that the federal law governing overtime does not allow the Labor Department to decide which workers are eligible based on salary levels alone.

The Fair Labor Standards Act says that employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule "creates essentially a de facto salary-only test," Mazzant wrote in the 20-page ruling.

Opponents to the overtime rule cheered the judge's ruling.

"Federal agencies cannot unilaterally reinterpret federal law to impose burdens on state governments and businesses, and today's preliminary injunction reinforces the importance of the rule of law and constitutional government," Laxalt said. 

"Left unchecked by the court, this latest example of federal overreach would have imposed millions of dollars of unfunded liabilities on the states, a loss of private sector jobs, huge financial and regulatory burdens on small businesses, and undoubtedly caused great difficulty across the country in implementing this oppressive rule," he added. "Businesses and state and local governments across the country can breathe a sigh of relief now that this rule has been halted."

The Retail Industry Leaders Association (RILA) also applauded the move.

"We welcome [the] ruling. As RILA has argued since the final rule was announced earlier this year, the DOL over reached beyond their authority increasing the threshold too much, too fast,” said Evan Armstrong, vice president for government affairs. "We will continue to monitor the appeal process with a focus on ensuring that employees are able to maintain the flexibility and upward mobility that they value."

According to NACS, the Association for Convenience & Fuel Retailing, oral arguments for summary judgment in the overtime case are scheduled for Nov. 28. It is unclear which side of the issue will prevail, so convenience retailers should still be prepared for a Dec. 1 enforcement date, the association advised.