06/08/2017

Lawsuit Claims Overtime Rule is in Effect

The suit was filed against Chipotle

A lawsuit filed against the restaurant chain Chipotle claims that a federal rule to expand overtime pay for millions of workers is in effect, despite an injunction handed down by a federal court late last year that banned the U.S. Department of Labor (DOL) from enforcing the new rule.

The class-action lawsuit, filed in U.S. District Court in New Jersey, charges that Chipotle should be paying overtime to employees who work more than 40 hours a week and earn less than $47,476 per year – the threshold adopted by the Labor Department in the rule it finalized last year. Plaintiffs’ attorneys argue that the rule took effect as scheduled on Dec. 1 because the court that ordered the injunction has not repealed the actual regulation.

“There’s been no finding that the rule is unlawful,” Joseph Sellers, an attorney representing the plaintiffs in the case, told The Washington Post. “We think the rule went into effect and that companies should be paying people overtime.”

The injunction halting the DOL overtime rule was granted in late November last year by a federal judge in Texas. The emergency motion was granted at the request of 21 states, the American Society of Association Executives (ASAE), the U.S. Chamber of Commerce and other like-minded organizations that challenged the DOL’s authority to double the salary limit that determines which workers should be eligible for overtime pay.

Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted the injunction as it “preserves the status quo while the court determines the department’s authority to make the final rule as well as the final rule’s validity.” In this injunction, the court ruled that the regulation exceeded the authority granted to the DOL by Congress.

ASAE had emphasized repeatedly that it is not against increasing the overtime salary threshold, but that creating a “one-size-fits-all” salary threshold for overtime eligibility across the country – inconsiderate of cost of living differences – would not be workable for many employers and, in fact, would have harmed many affected employees as well.

This is the first legal challenge to emerge asserting that companies should be paying overtime in accordance with the rule finalized under the Obama administration. Many legal experts say that the injunction was sufficient to block the rule from taking effect.

“The argument that the plaintiffs seem to be making is a reach,” Paul DeCamp, a former administrator of the DOL’s Wage and Hour Division under President George W. Bush, told Bloomberg BNA. “The whole purpose of issuing the injunction was to prevent the rule from going into effect in the first place.”

An appeal of Mazzant’s injunction is pending in the U.S. Court of Appeals for the Fifth Circuit, and a motion for summary judgment is pending in Mazzant’s court. The Trump administration has until June 30 to file a brief with the appeals court. During his confirmation hearing in March, Labor Secretary Alexander Acosta seemed to suggest that an update to the overtime rule might be warranted, but said he had “serious questions” about the previous administration’s efforts to double the salary threshold. That “goes far beyond a cost of living adjustment,” Acosta said. He went on to say that an inflation-adjusted threshold would be about $33,000.

This article was provided to OSAE by The Power of A and ASAE's Inroads.