Justice Department Drops Appeal of Overtime Rule

On Wednesday, the Justice Department announced that it was dropping its appeal of the Obama-era overtime rule, five days after a Texas federal judge struck down the rule. Judge Amos Mazzant, an Obama-nominated judge, invalidated the rule on August 31, saying the DOL “exceeded its authority and has gone too far with the final rule. Nothing in [the law] allows the Department to make salary rather than an employee’s duties determinative.”

Late last year, Mazzant blocked the Obama Administration’s final overtime rule just days before it was to go into effect on December 1, 2016. The Obama Administration’s DOL rule would have raised the salary threshold for receiving mandatory overtime from $23,660 to $47,500 a year. PMAA welcomes this news because if the overtime rule were to be implemented, many employers would be faced with the possibility of reducing hours worked to 40 or less per work week. Management would also need to be diligent in watching hours worked for those employees who do not meet the salary requirements, or would be legally obligated to pay overtime pay at a rate of 1-1/2 times their normal rate of pay for all hours worked over 40.

Lastly, by increasing the threshold for overtime-eligible employees, companies could be forced to cut bonuses and benefits to boost the managers’ base salaries and lower hourly rates to compensate for the expense of paying salaried managers more.