Federal Judge Blocks New Overtime Rule Scheduled to Take Effect December 1
On November 22, 2016, a federal judge issued a preliminary injunction postponing the implementation of the new Department of Labor overtime rules that were scheduled to take effect December 1, 2016. The rules would require overtime for many white collar workers.
Pending final resolution of the case, employers are not required to comply with the overtime rules.
Judge Issues Preliminary Injunction Enjoining New Law From Taking Effect
On November 22, 2016, Judge Amos Mazzant, a federal judge in Texas, enjoined the new Department of Labor overtime rules on a nationwide basis. As a result, employers are no longer required to comply with the new overtime rules on December 1, 2016. Specifically, the DOL is enjoined from "implementing and enforcing" the new rule (which most importantly would have raised the minimum salary for most exempt executive, administrative, and professional employees to $913/week from $455/week). The judge noted that nothing in the Fair Labor Standards Act (FLSA) indicates that Congress intended the DOL to define the exemptions with respect to a minimum salary level—only with respect to duties—and that, consequently, the new rule is "unlawful."
In his ruling, Judge Mazzant stated that it was improper for the DOL to adopt a salary test that categorically excludes a substantial number of workers who meet the exemptions’ duties-related requirements. He noted that the DOL overstepped its authority and that the rule change equated to a de facto “salary-only test,” because it would have had the effect of causing millions of workers who are today classified as exempt to become non-exempt, despite the fact they would have exactly the same job duties on December 1. He stated that Congress never authorized the DOL to classify white collar workers based on salary alone, and the DOL ignored Congress’s intent by attempting to raise the minimum salary as it did. “If Congress intended the salary requirement to supplant the duties test,” he said, “then Congress, and not the DOL, should make that change.”
Judge Mazzant stated that the salary levels that have historically served as part of the DOL’s overtime exemption test acted as a floor and not a ceiling and that the new rule’s proposed salary jump was "drastic”. He specifically pointed out that the proposed substantial increase in the salary threshold could lead to inconsistent treatment of workers who each fulfill white collar duties, but are paid differently. For example, a convenience store manager who clearly acts as an executive and who is paid a salary annualizing to only $47,000 a year would be treated differently than a similarly situated manager who is paid a salary equating to $47,500 a year.
The immediate impact is that employers do not have to comply with the new overtime regulations on December 1, 2016. If the final rule had been implemented, then the Trump administration would have needed to issue a new rule to modify or overturn the Obama administration's regulation, which could take years. The Court’s injunction may allow Trump to modify or repeal the rule without going through formal rule-making. Employers should be aware that this is only a preliminary injunction, and not a permanent injunction and that this only delays the effective date of the new regulations until the Court makes a final determination. Employers that have not yet made changes, therefore, should continue their planning process so they can be in compliance with the revised regulations if and when they do become effective. Those that already have made changes will need to decide whether it makes business sense to suspend, alter, or reverse those changes pending any subsequent legal developments.
We will continue to monitor this case and promptly notify you of any further developments as they occur.
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