Three Overtime Rule Lawsuits, Three Judges – What Now?

By Fiona Ong and Eric Hemmendinger - Shawe Rosental LLP

June 5, 2024

As most employers (hopefully) know, the U.S. Department of Labor issued a final rule that will significantly increase the salary threshold for the exemptions from the Fair Labor Standard Act’s minimum wage and overtime requirements, as discussed in our April 24, 2024 E-lert. Consistent with the now-standard practice in response to pretty much any regulation issued by any federal workforce agency, three lawsuits have been filed to enjoin the rule from taking effect on the scheduled date of July 1, 2024. In Texas, of course. Because those Texas federal courts have been notoriously unfriendly to federal agency actions. But those three lawsuits are pending before three different judges…

The first suit was filed on May 24, 2024 in the ever-popular federal Eastern District of Texas by a consortium of business organizations. The case has been assigned to Judge Sean Jordan. The second and third suits were both filed on June 3, 2024, one by the State of Texas also in the Eastern District of Texas, but before Judge Amos Mazzant (remember that name), and the other by Flint Avenue, LLC, a software company, in the Northern District of Texas before Judge James Wesley Hendrix.

Back in 2016, there was a similar situation. The Obama administration issued a final rule that significantly increased the salary threshold. Two lawsuits were filed in the Eastern District of Texas – one by generally the same consortium of business groups as in this instance (the “Business Plaintiffs”), and the other by a group of 21 States (the “State Plaintiffs”). The same judge, the Honorable Amos Mazzant (sound familiar?), was assigned to both cases. The cases were consolidated upon the unopposed motion of the Business Plaintiffs. Judge Mazzant then issued a nationwide preliminary injunction of the rule on November 22, 2016, approximately a week before the rule was scheduled to take effect on December 1, 2016. Judge Mazzant permanently enjoined the rule in August 2017.

Unsurprisingly, the three current lawsuits rely heavily on Judge Mazzant’s 2017 decision that found the 2016 rule unlawful, in that it inappropriately made salary determinative of exempt status. Judge Mazzant also rejected the automatic escalation of the salary level every three years.

So now we have three different lawsuits before three different judges in two different judicial divisions – albeit all in Texas. What happens now? Well, there are several possibilities.

Separate Cases. All three cases could continue to move forward separately, with each judge deciding the case before him. We note that, while the bulk of each case makes the same claims about why the overtime rule is unlawful (in reliance on Judge Mazzant’s 2017 opinion), Texas argues, among other things, that the federal government is trespassing on powers reserved to the states regarding the setting of pay for state employees  (i.e. Don’t mess with Texas!). Flint Avenue argues, among other things, that Acting Secretary Su, who has not been confirmed by the Senate, did not have the authority to issue the rule. So the three cases are not identical. But if they are decided separately, there is the possibility that the judges may come to different conclusions about the lawfulness of the overtime rule. And what a mess that would be….

Stay. So district courts also have the power to stay (or put on hold) a case pending the outcome of independent proceedings that might impact the case. This could be a situation in which two of the cases are stayed. But which two? There is a “first to file” rule that generally gives priority to the first-filed lawsuit – here, the Business Plaintiffs suit. So, it is possible that the Texas and Flint Avenue cases could be stayed pending the outcome of the Business Plaintiffs suit.

Intervention. The plaintiffs from the Texas and/or the Flint Avenue cases could move to intervene (i.e. to become a party) in the first-filed Business Plaintiffs case. If that motion is granted, then their separate cases may be dismissed. (This is actually what just happened in the cases challenging the Federal Trade Commission’s final rule banning most non-compete agreements. Immediately after the FTC issued its rule, a private business, Ryan, LLC, filed suit in the federal district court for the Northern District of (yes, you guessed it!) Texas. The next day, the U.S. Chamber of Commerce filed its lawsuit in the Eastern District of (yup!) Texas. The Chamber then requested a stay based on the first-to-file rule, which was granted by the judge, and subsequently moved to intervene in the Ryan case. The Ryan judge granted the Chamber’s motion, and the Eastern District judge then dismissed the Chamber’s separate lawsuit.)

Joinder. For cases involving a common question of law (like whether the overtime rule is lawful), Rule 42 of the Federal Rules of Civil Procedure (which governs case procedure in the federal district courts) permits a federal court to “join for hearing or trial any or all matters at issue in the actions.” This means that the cases remain separate, but may be heard together to avoid unnecessary cost or delay. Now, while the Business Plaintiffs case and the Texas case are before different judges, they are pending in the same district court. So one option is for one of the cases to be assigned to the other judge, and that judge can then hear the cases together, as appropriate.

Consolidation. Rule 42 also permits a court to consolidate (or combine) the cases into a single case. That is what happened in 2016. This is another possibility for the Business Plaintiffs and Texas cases.

Transfer. Of course, we have the Flint Avenue case hanging out in a separate District – the Northern District. But there is a federal law, 28 U.S. Code § 1404, that, for the convenience of parties and witnesses, in the interest of justice, permits a district court to transfer a case to any other district where it might have been brought or to any district to which all parties have consented. If the Flint Avenue case could have been brought in the Eastern District, it is possible that Judge Hendrix could transfer the case to that district, where it could then be joined or consolidated with either the Business Plaintiffs case or the Texas case – or both, if they have already been consolidated.

So, we don’t yet know what will happen. But we would hope that there is some effort to avoid dueling opinions, one way or another!

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