Trump's Anti-Regulation Era Has Already Begun
When a federal judge in Texas last week froze a regulation extending overtime pay to thousands of workers, the holding had an extra sting. The hit to President Barack Obama’s legacy came from his own appointee, not a Bush-era holdover. And the decision will make it much simpler for President-elect Donald Trump’s Labor Department to scrap the regulation than it would have been without the judge’s activist ruling.
The regulation in question interprets the 1938 Fair Labor Standards Act. The law sets the federal minimum wage (currently $7.25 an hour), and says that employees who work more than 40 hours a week are entitled to time and a half -- that is, overtime.
Section 213 of the act allows exemptions for employees “in a bona fide executive, administrative, or professional capacity.” Because the law doesn’t define those terms, the Department of Labor issues regulations that do. As amended in 1961, the law actually specifies that the overtime terms may be “defined and delimited from time to time by regulations.”
The regulations have evolved over time, depending on circumstances and administration policy. Early regulations were intended to cover blue-collar workers but not white-collar workers, and some distinguished salaried employees from those paid an hourly wage.
Later regulations included the amount of salary as a relevant consideration. In 2004, the George W. Bush administration enacted regulations that also included a minimum salary requirement of $23,600 a year to qualify for the exemption.
The Obama administration changed the regulations to raise the minimum salary level to $47,892 a year: the 40th percentile of salaried workers in the U.S. The change was economically significant, because it obviously includes many more employees in the overtime category. It was clearly aimed to help lower-middle-class workers.
From a legal standpoint, this regulation change should have been business as usual. The regulations were enacted after proper notice and comment periods. According to the well-established Supreme Court rule known as the Chevron doctrine, named for a 1984 precedent, the courts defer to agency interpretations of ambiguous statutes. Deference should be even more certain when the statute itself says the agency gets to interpret the law, as the fair labor act does.
Yet remarkably, District Judge Amos Mazzant III issued a preliminary injunction staying the effect of the new regulation nationwide on the theory that it was likely to be overturned as unlawful.
The analysis in Mazzant’s opinion is pretty poor. He purported to apply the Chevron doctrine, which only applies when the statute is ambiguous. Mazzant then insisted that, contrary to the practice of previous regulations, it’s unambiguous that the definition can’t rest on salary alone.
But the Bush regulations, and those that came before it, also relied on salary -- and the Obama regulations are no more purely salary-based than those. Mazzant tried to distinguish those by saying that the salary levels were intentionally made low to screen out “obviously nonexempt employees.” But that makes no difference, because the definition of what counts as low salary falls within the Labor Department’s discretion.
More fundamentally, Mazzant’s opinion calls into question exactly the policy deference that the Chevron doctrine is intended to create. In essence, Mazzant was saying he doesn’t like the new salary level, so he’s blocking it.
It’s remarkable that an Obama appointee -- even a Texan -- would block an Obama regulation in this sloppily activist way. Politically, the timing is no accident. It’s a sign of the administration’s collapsing legal credibility after Trump’s victory. A true cynic might speculate as to whether Mazzant sees an opportunity for judicial advancement with this anti-regulatory judgment.
Unfortunately, the consequences aren’t trivial. Without the judgment in place, the Trump Labor Department could have reversed the regulation. But that would’ve required a new process of rulemaking after notice and comment. And any new regulation could have been challenged in court as arbitrary.
With Mazzant’s judgment in place, the Department of Labor has an easy excuse to drop the new regulations or choose not to enforce them. Even if it chooses to defend the regulation in court, it could do so half-heartedly, essentially tanking the case. It’s difficult to believe that the anti-regulatory Trump administration would insist on preserving the Obama regulations once a democratically appointed judge has blocked them.
Because judicial appointees remain on the bench after an administration leaves office, courts usually lag the politics of new presidential administrations. Mazzant is apparently an exemption. This decision is on board with Trump-style antiregulatory jurisprudence -- and the inauguration is still seven weeks away.
I’m not even sure the Chevron doctrine’s trigger of an ambiguous statute applies when the law itself tells the initiative agency to interpret the law, as the Fair Labor Standards Act does. But that’s an inside-baseball topic for administrative lawyers.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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