Judge Halts Obama Administration’s Overtime Rule in a Victory for States and Workers

With less than two months to go before President-elect Donald Trump’s inauguration, President Obama’s legacy took another blow this week — this one from Judge Amos Mazzant, who he appointed to the Eastern District of Texas. On Tuesday, Mazzant blocked the U.S. Department of Labor’s new overtime rule, which was set to go into effect December 1. Nevada attorney general Adam Laxalt, in partnership with 20 other state attorneys general and governors, had sued to stop it, and the group was granted a preliminary injunction; now, the rule will not be implemented as litigation continues. Unless the Department of Labor engages in an unusually aggressive effort to expedite the response to Mazzant’s ruling, the litigation is likely to outlast the Obama administration — and, under a Trump administration, one can assume that Department of Labor officials will drop the litigation or roll back the rule.

As I previously reported at National Review Online,

The new rule forces both public- and private-sector employers to pay time-and-a-half overtime to any hourly employees earning less than $47,476 per year, nearly double the old threshold of $23,660. Employees earning less than the threshold but performing “executive, administrative, or professional” duties were previously exempt from the DOL’s overtime requirements, but the new rule mandates that they receive time-and-half pay for extra work, too. In so doing, it directly overrides the exemptions outlined by Congress in the Fair Labor Standards Act. In addition to modifying the threshold and eliminating the white-collar exemption, the Obama administration created an algorithmic method to automatically update the salary threshold every three years based on wage growth and other factors. Laxalt calls this algorithm “ratcheting,” and it is a significant component of his lawsuit.

Laxalt and his coalition sued the Department of Labor on the grounds that the overtime rule overrode congressional authority by omitting white-collar exemptions; it violated the Tenth Amendment by forcing states to pay employees a specific salary, indirectly controlling state budgets; and it violated the Administrative Procedure Act by ratcheting up the salary threshold every three years.

If Judge Mazzant had denied the preliminary injunction, as many as 44 percent of small businesses would have felt the pressures inflicted by the Obama administration’s blatant federal overreach. “Like all of President Obama’s policies that are intended to help workers, they actually hurt workers,” Laxalt tells National Review. Among other disastrous consequences of the increased salary threshold, business owners would have responded by laying off workers and reducing hours, services, and pay.

In the public sector, the overtime rule would have likewise had an adverse effect. For example, state officials would have been forced to find additional funds to comply with the rule, potentially squeezing out other services and programs. “It squarely puts the federal government into our budget process,” Laxalt says, noting that the rule imposes “millions of dollars of unfunded liabilities on the states.”

The Department of Labor could expedite the review process and file an appeal in the Fifth Circuit with hopes of overturning the preliminary injunction. But, based on the legal rationale provided in Mazzant’s court order, it seems that Laxalt’s coalition would have a good chance of ultimately prevailing in court over the Department of Labor. Mazzant wrote, “The State Plaintiffs have shown a likelihood of success on the merits because the Final Rule exceeds the Department’s authority.”

While the ruling is good news for the states and workers, it’s bad news for Obama’s legacy. His signature policies — from Obamacare to the overtime rule to the Iran deal — are in jeopardy as his time in the Oval Office dwindles.

— Austin Yack is a William F. Buckley Fellow in Political Journalism at the National Review Institute.