Employers who have been scrambling to comply with the new overtime rules by December 1, 2016 just received a holiday gift from a federal judge in Texas. On November 22, 2016, the U.S. District for the Eastern District of Texas granted a nationwide preliminary injunction blocking the new rules from taking effect after concluding that the Department of Labor (DOL) exceeded its authority granted by Congress. The lawsuit challenging the new rules was filed on behalf of 21 states and several employer groups and the Court’s preliminary injunction is applicable to all states blocking the new rules from taking effect on December 1st.
The injunction is a major blow to the Obama Administration’s efforts to increase wages and extend mandatory overtime pay to more than 4 million salaried workers. Under the new rules, the minimum salary for most workers to qualify for exempt status under the Fair Labor Standards Act (FLSA) would be increased from $23,660 ($455 per week) to $47,476 ($913 per week).
Interestingly, the injunction was issued by U.S. District Court Judge Amos Mazzant, who was appointed by President Obama. In his 20-page opinion, Judge Mazzant concluded that federal law governing overtime does not allow the DOL to decide which workers should be eligible for overtime based on salary levels alone. The FLSA provides that employees can be exempt from overtime requirements if they perform certain job duties – for example, executive, administrative and professional duties. The Judge concluded that the new rule “creates essentially a de facto salary-only test.”
In granting the injunction, Judge Mazzant found that the new rules were “contrary to the statutory text and Congress’ intent” and that it is Congress’ job to make these changes, not the DOL.
What does this mean for employers? The preliminary injunction has the effect of halting the enforcement of the new overtime rules on a nationwide basis. To overturn the ruling, the government will need to obtain relief through the federal appellate court which could take a considerable amount of time. If the injunction is not overturned on appeal, it may be difficult for the DOL to revive the rule under the new administration. After the election, Republicans now have a majority in both houses of Congress. The DOL’s enforcement agenda will change significantly under the Trump administration. We will keep you posted on developments. For now, employers can breathe a sigh of relief knowing that the December 1st deadline is no longer looming.