Daily Update November 28, 2016

Injunction Temporarily Blocks New OT Rule

On November 22, 2016, a federal district court in Texas granted a preliminary injunction that temporarily blocks the U.S. Department of Labor (DOL) from implementing and enforcing its recently revised regulations on the white collar exemptions to the Fair Labor Standards Act (FLSA).  In addition to existing eligibility criteria, the new rule increased the minimum salary from $23,660 to $47,892 in order to be exempt from overtime.  The court found that the DOL exceeded its authority by establishing this new minimum rate.  

Members should note that this is only a temporary injunction, not a permanent one. The injunction simply prevents the regulations from going into effect on December 1. There will be a decision issued at a later date on the actual merits of the case, so changes in the FLSA salary threshold for exemption may be back.  The DOL could appeal the ruling but may choose not to do so since the new administration could simply reverse the executive order that created this new rule.  




Additional coverage:

PBS -  http://www.pbs.org/newshour/bb/texas-judge-issues-injunction-blocking-overtime-pay-law/

USA Today -  http://www.usatoday.com/story/money/2016/11/22/judge-blocks-new-overtime-rule/94309346/

Washington Post -  https://www.washingtonpost.com/news/get-there/wp/2016/11/22/judge-halts-federal-rule-that-would-have-expanded-overtime-pay-to-millions-of-workers/

Additional expert's thought on the OT issue at this time: 

What is likely to happen next?

  • The DOL under the current administration will almost certainly appeal this decision to the Fifth Circuit Court of Appeals. The Fifth Circuit could stay the district court's decision while it hears the appeal (essentially allowing the new rule to go into effect while the court adjudicates the appeal). We think a stay is unlikely, especially because of the difficulties that could arise from forcing employers to comply with the new rule and then invalidating it.
  • Whoever loses at the Fifth Circuit would have the option of seeking review from the U.S. Supreme Court, which is unlikely to hear the appeal until a new administration is in place. Significantly, the DOL does not need to maintain its position from administration to administration (and there are indications that the new administration is opposed to the new rule). In other words, the DOL under a new administration could decide to fight for the new regulations or abandon them. 

What are our options?

  • If your organization was set to increase the salaries of exempt employees or reclassify them to non-exempt status only because they did not meet the new salary threshold, you no longer need to do so at this time.
  •  In the process of coming into compliance with the new regulations, many of our clients found that certain exempt employees also did not meet the duties tests for the "white collar" exemptions. The Texas court's decision does not affect the duties tests. If an exempt employee did not meet the duties test before this decision, s/he does not meet it now and should be reclassified.

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