Reprieve: Federal court puts a hold on new DOL overtime rule

Dec 7, 2016

By Tonda Rush
Director/Public Policy and General Counsel | NNA

On the eve of the first payrolls governed by changes in the Wage and Hour laws, community newspapers got a reprieve from a harsh new rule dictated by the U.S. Department of Labor. A federal court judge in Texas, Amos L. Mazzant III, issued a temporary injunction preventing an increase in the exempt salary threshold from going into effect on Dec. 1.

The industry was in the midst of recalculating scores of payroll plans, trimming salaried employees and moving many people previously classified as professionals into time-clock jobs. The changes resulted from a Labor Department decree last May that doubled the salary required to consider employees exempt from the overtime laws. The new rule increased the salary levels from $455 per week to $921 per week.

National Newspaper Association President Matthew Paxton IV, publisher of The News-Gazette in Lexington, VA, welcomed the ruling.

He said: “The dramatic increase in the salary requirements put community newspapers and their professional staff into a bind. Although NNA had supported a timely adjustment in the salary levels, we had hoped for something that was realistic in today’s slow economy.

“We had also asked the Labor Department to respect wide-ranging regional living standards and the need for people covering the news to have flexibility in their schedules. Since the department’s disappointing decision, we have worked hard to educate people on Capitol Hill that the ruling would have unintended consequences for our staff. People who used to be on salary, for example, were finding themselves reclassified as hourly workers, and facing the prospect of much reduced paychecks during slow seasons. We are happy that the judge recognized the impact of the new rule on the workforce and businesses. Now we want the Labor Department to reassess, and make more modest changes in the law.”

The escalation of the exempt salary, which the DOL called necessary because it had not adjusted the salary levels since 2004, sent many newspapers into a tailspin. Editors who previously had flexibility in hours and the ability to govern their coverage by their own professional mandates found themselves forced into a 40-hour week and considered non-exempt employees.

The new rule also affected state governments and many other industries. In September, a consortium of state governments led by Nevada and businesses organized by the National Federation of Independent Businesses and the U.S. Chamber of Commerce sued the Labor Department. That lawsuit led to the Nov. 22 ruling that stayed the implementation of the new rule.

At issue in the case was whether the Labor Department had the authority to make such sweeping changes in a law that Congress had written, according to the court, to set up white-collar jobs as outside the overtime rules. Congress had made many exceptions to the overtime requirement, Mazzant said. A critical exemption was for the “EAP” category of workers—executives, administrators and professionals.

Mazzant examined the meaning of the EAP category in the Fair Labor Standards Act. He said:

“After reading the plain meanings together with the statute, it is clear Congress intended the EAP exemption to apply to employees doing actual executive, administrative, and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level. The statute’s use of ‘bona fide’ also confirms Congress’s intent. ‘Bona fide’ modifies the terms ‘executive, administrative, and professional capacity.’ The Oxford English Dictionary defines ‘bona fide’ as
‘[i]n good faith, with sincerity; genuinely.’ The plain meaning of ‘bona fide’ and its placement in the statute indicate Congress intended the EAP exemption to apply based upon the tasks an employee actually performs. Therefore, Congress unambiguously expressed its intent for employees doing ‘bona fide executive, administrative, and professional capacity’ duties to be exempt from overtime …. (t)he Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”

The Labor Department had opposed an injunction, and argued that if the judge were to halt the rule, his injunction had to be nationwide to prevent harm for the states and industries in the case. He decreed that his injunction would stay in place until a full court review could be completed.

The Labor Department could immediately seek a review in the U.S. Court of Appeals for the Fifth Circuit to overturn Mazzant’s injunction. However, the incoming Trump administration has already declared its intent to change the rule. A new Secretary of Labor could decide to withdraw an appeal while the agency considers a revision of the rule.

For newspapers, the bottom line is that the old rules for overtime-eligible employees remain in effect until a court rules otherwise. So an employee earning less than $455 per week or not qualifying under the EAP exception remains overtime eligible. Employees with salary in excess of the $455 per week and qualifying under one of the white-collar exceptions remain exempt from overtime.

NNA has held two webinars on its Pub Aux Live! platform, and has been responding to questions from members through its Federal Laws Hotline. Responses from member newspapers have indicated great concern about the implementation of the new rule and the effects both on employee morale and news coverage. Newspapers were rethinking policies ranging from monitoring police radios after hours to sending employees to state events to win awards.

Publishers were counseled in early fall to begin charting hours for any employee who might be in the range for new overtime eligibility, so that changes in policy could be implemented. Although the Texas ruling has suspended the new rule for the time being, newspapers should remain on alert and continue their evaluations in case a new ruling is handed down.