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Aug 31, 2017

The Department of Labor rule that would have compelled employers to pay overtime to millions of more workers has been struck down by a federal court in Texas.

Agreeing with business groups and the 21 states that had challenged the Obama administration rule, District Judge Amos Mazzant said the pay level in the changed rules was set too high.

What the Labor Department had done was to nearly double the minimum pay — from $455 to $913 a week — for determining what workers were exempt from overtime and what workers were entitled to it.

“This significant increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level,” Mazzant said in his ruling.

While that was also true of the old salary threshold, the states and business groups that challenged the DOL argued the new pay level was set so high that it would sweep in millions of workers performing managerial, administrative and professional work.

Under the Fair Labor Standards Act, workers regardless of how much they earn must be paid overtime, except if they fall under certain exemptions, which largely define them as managers and white collar workers. But over the years, the DOL has adopted a financial test setting a minimum pay as a way to simplify the classification.

Thus, those making less than $455 a week are automatically to be paid overtime. And under the duties test, even workers earning more than the $455 a week are entitled to overtime unless they are “bona fide executive, administrative, professional (or) outside sales employees.” Some types of computer jobs also are included.

The revised salary threshold was to have gone into effect December 1 last year. But just weeks before the deadline, Judge Mazzant issued an injunction which left the old pay level — first adopted in 2004 — in place. The Labor Department appealed the injunction, then reversed course after the Trump administration took office. That left the injunction in place and freed the district court to rule on the merits.

In his ruling, Mazzant said the DOL can use a salary test, but only in conjunction with a duties test.