Court Blocks New U.S. Overtime Requirements

 - November 28, 2016, 10:47 AM

In a move welcomed by aviation businesses, a U.S. district court has issued an preliminary injunction to block a new Department of Labor rule that would significantly increase eligibility of mandatory overtime. The Labor Department (DOL) in May released the rule, which increased the minimum salary for employees “exempt” from mandatory overtime requirements from $23,660 to $47,476. Under the rule, the exempt threshold would be adjusted periodically. The rule was to take effect December 1.

DOL issued the rule, which increased the number of employees eligible for mandatory overtime from six million to 11 million, over the objections of numerous business groups, including a number of aviation entities. NATA had expressed concern over the impact on small businesses and NBAA had noted that the change was among “the most substantial since the introduction of the Fair Labor Standards Act (FLSA) in 1938.”

Twenty-one states and more than 50 business organizations are challenging the rule, and on November 22 the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking both implementation and enforcement of the rule. The court determined that the rule “does not comport with Congress’s intent” as far as who is exempt from the mandatory threshold. The court noted that the rule’s “significant increase to the salary level creates essentially a de facto salary-only test” for exemption, but said this was not in line with congressional intent. 

The court noted arguments made by the states that the rule’s provision for periodic adjustments is illegal, because it bypasses a notice and comment period. The court further determined that “because the final rule is unlawful, the court concludes the department also lacks the authority to implement the automatic updating mechanism.”

While the lawsuit was filed by specific states and businesses, the court decided to apply its ruling nationwide because “the scope of the alleged irreparable injury extends nationwide” and added that such application would protect employers and employees from being subject to different regulations based on location.

Aerospace Industries Association (AIA) president and CEO David Melcher lauded the ruling, echoing the belief that the rule exceeded DOL’s statutory authority and cited Congressional Budget Office estimates that the rule would impose more than $1 billion in costs to business.

“A responsible increase to the salary threshold for overtime pay is due; however, DOL’s rule moves too far, too fast and disproportionately impacts small businesses, nonprofits, local governments and academic institutions,” Melcher added.