Court Halts President Obama's Overtime Rules, but Rebuffs Effort to Overturn Garcia

Steven D. Schwinn, John Marshall Law School

Judge Amos L. Mazzant (E.D. Tex.) granted a nationwide injunction today against the Obama Administration in enforcing its new overtime rules.

The ruling is a blow to President Obama's effort to update the overtime requirements through administrative rulemaking, and not legislation. The nationwide injunction seems extreme, but, as Judge Mazzant noted, this district-court-issuing-a-nationwide-injunction-thing seems to be a growing trend among district court judges striking President Obama's administrative initiatives.

At the same time, the new Trump Administration will almost surely undo these rules, anyway.

So the big loser is the lower-income (between $23,660 to $47,892 per year), salaried worker. That person, covered by the now-enjoined rule, won't qualify for overtime. (The court said that the FLSA requires a "duties" test. So if DOL can reissue regs around duties, some of these workers may still qualify. But don't count on this with the new administration.)

The government can appeal, but the conservative Fifth Circuit seems likely to affirm. And again: The Trump Administration will almost surely undo this, anyway.

Recall that DOL issued rules raising the "executive, administrative, and professional" exemption from the FLSA requirement that employers pay overtime to workers. In particular, DOL issued rules that said that employees who earn up to $47,892 per year (up from $23,660 per year) fell outside the exemption, and therefore qualified for mandatory overtime. The new rules also set an automatic update that adjusts the minimum salary level every three years.

States and business organizations sued, arguing that the rules violated the Administrative Procedures Act, because they weren't authorized by the FLSA. The state plaintiffs threw in a claim that the new rules and the entire FLSA violated the Tenth Amendment and federalism principles. Because this claim ran headlong into Garcia (which upheld the application of the FLSA to the states), the states, for good measure, went ahead and boldly argued that the court should overturn Garcia.

The court agreed with the APA claim, but disagreed about Garcia. As to the APA, the court said that the language of the FLSA--"executive, administrative, and professional" employees are exempt from the overtime mandate, and that DOL can promulgate regs to implement this exemption--required that the government consider employees' duties, and not just income, in determining whether an employee qualifies. Because the new regs only considered income, they violated the FLSA.

As to Garcia: the court flatly rejected the call to overturn it. This is hardly a surprise: It's still good law, after all. It seems the states were banking on a favorable ruling from the Fifth Circuit and a split Supreme Court. (That sounds familiar.)

Or they were banking on a differently comprised Court entirely--one friendly to their anti-Garcia claim. And who knows? Now they might get it.