Industry News | August 31, 2017 | By Danny Klein | QSR Exclusive Brief

Texas Judge Strikes Down Overtime Rule

The rule would have made any salaried employee making less than $47,476 eligible for overtime. Thinkstock
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The Obama-era overtime rule was struck down by a Texas federal judge Thursday, putting an end to a controversial and hotly contested rule that would have dramatically changed the way restaurants around the country conduct business.

The rule, which would have made any salaried employee making less than $47,476 eligible for overtime, was invalidated by U.S. District Judge Amos Mazzant on the basis that the U.S. Department of Labor improperly used a salary-level test to determine which workers are exempt from overtime compensation.

The Restaurant Law Center lauded the decision. “The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule,” said Angelo Amador, its executive director. “Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with DOL on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted.”

Per Law360, Judge Mazzant granted summary judgment to the Plano Chamber of Commerce and more than 55 other business groups who challenged the 2016 rule. In addition to raising the minimum salary threshold required to qualify for the Fair Labor Standards Act’s “white collar” exemption, it also increased the overtime eligibility threshold for highly compensated workers from $100,000–$134,000.

“The department has exceeded its authority and gone too far with the final rule,” Judge Mazzant said, according to Law360. “The department creates a final rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress’ unambiguous intent.”

This result appeared near in June when the DOL stepped back from the rule and said it would “undertake further rulemaking to determine what the salary level should be.”

A reply brief from the DOL mentioned it could still change the rules so more salaried employees would be eligible for time-and-half pay in the future, but that it “decided not to advocate for the specific salary level [$913 per week] set in the final rule at this time …”

In November, Judge Mazzant blocked the overtime regulation. The preliminary injunction, issued in a 20-page order, halted the overtime rule from taking effect December 1. That was the first blow in what would eventually be a crushing one for the Obama administration rule.

Many pundits expected this to be the case as President Donald Trump was preparing to take office.

Judge Mazzant said Thursday that the increased threshold would essentially render the jobs of employees under that salary mark useless.

A Homebase customer analysis report predicted that roughly 85 percent of American managers at local businesses would have been impacted by the change.

In the foodservice world, it would have been pronounced, as an incredibly substantial portion of workers fall under that $47,000 number. With margins as thin as they are, few companies can afford to pay out overtime, and it would have dramatically shifted the structure of restaurant organizations across the U.S.