States Argue That Texas Court Properly Blocked Overtime Rule

In a legal brief filed on January 17, 2017, the 21 states that obtained a nationwide preliminary injunction that blocks the U.S. Department of Labor (DOL) from implementing its revisions to overtime rules under the Fair Labor Standards Act (FLSA) urged the U.S. Court of Appeals for the Fifth Circuit to uphold that injunction.

The states submitted their brief in response to the DOL’s appeal of the injunction, which was issued on November 22, 2016, by Judge Amos L. Mazzant III, a federal judge for the Eastern District of Texas, in State of Nevada v. United States Department of Labor. 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 FLSA’s major white collar overtime exemptions.

In its opening brief, the DOL argued that Judge Mazzant’s decision is foreclosed by a Fifth Circuit decision from 1966, Wirtz v. Mississippi Publishers Corp., and is in considerable tension with a 1997 Supreme Court of the United States decision, Auer v. Robbins. The DOL emphasized that for the past 75 years, it has been issuing regulations that require employees to meet a combination of three tests—a salary level test, a salary basis test, and a duties test—to be treated as exempt executive, administrative, or professional (EAP) employees. The DOL asserted that Judge Mazzant’s reasoning would invalidate all versions of the salary level test that have been used for the past 75 years. The agency also argued that the salary level test always has excluded from exemption some individuals who pass the duties test.

In their response brief, the states argue that Judge Mazzant correctly found that the DOL exceeded its authority by increasing the minimum salary level contained in the regulations from $455 per week to $913 per week. Judge Mazzant ruled that the use of the new threshold would supplant the duties tests and thereby exclude from exemption many bona fide EAP employees under Section 13(a)(1) of the FLSA.

Building on this point, the states argue in their appellate brief that the salary level test has always been an unauthorized and controversial DOL invention, but it also has always been set so low as to be generally inconsequential. “But the absence of more recent challenges does not ratify what the DOL has now done: openly transforming the salary threshold so that it deliberately excludes many bona fide EAP employees from an overtime exemption.”

The states also point out that Wirtz predates the Supreme Court’s 1984 decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., which established a two-step framework for evaluating agency regulations. Applying a Chevron analysis, Judge Mazzant found that the DOL overtime rule failed when evaluated at both steps. With respect to the Supreme Court’s Auer decision, the states contend that the district court accurately distinguished Auer on grounds that it involved the application of the salary-basis test and not the legality of the salary-level test.

Amicus briefs in support of the states’ position must be filed on or before January 24, and the DOL’s reply brief 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.